Question $10$

Two mutually exclusive alternatives are being considered.

Alternative A has an initial cost of $$100$ and uniform annual benefit of $$19\mathrm{.}93.$ The useful life is $10$ years, and the IRR is $15\%$

Alternative B has an initial cost of $$50$ and uniform annual benefit of $$11\mathrm{.}93.$ The useful life is $10$ years, and the IRR is $20\%$

The MARR is $8\%.$

Which of the following equation$($s$)$ will solve for the IRR that allows you to make a correct decision based on Rate of Return

Analysis?

$PW(A)=-100+19\mathrm{.}93(\frac{P}{A},i^{**},10)$

$PW(B)=-50+11\mathrm{.}93(\frac{P}{A},i^{**},10)$

$PW(A)=-100+19\mathrm{.}93(\frac{P}{A},8\%,10)$

$PW(B)=-50+11\mathrm{.}93(\frac{P}{A},8\%,10)$

$PW=-50-8(\frac{P}{A},i^{**},10)$

$PW=50+8(\frac{P}{A},i^{**},10)$

$PW=-50+8(\frac{P}{A},i^{**},10)$

$PW=50+8(\frac{P}{A},8\%,10)$

$PW(A)=100-19\mathrm{.}93(\frac{P}{A},i^{**},10)$

$PW(B)=50-11\mathrm{.}93(\frac{P}{A},i^{**},10)$

$PW(A)=100-19\mathrm{.}93(\frac{P}{A},8\%,10)$

$PW(B)=50-11\mathrm{.}93(\frac{P}{A},8\%,10)$

Choose Alternative B$,$ since the IRR is the largest.

Choose both Alternative A and B$,$ since IRR is greater than the MARR.

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