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Six mutually exclusive projects A, B, C, D, E, and F, are being considered by XYZ. They have been ordered by first costs so
Six mutually exclusive projects A, B, C, D, E, and F, are being considered by XYZ. They have been ordered by first costs so that project A has the lowest first cost, project F the largest. Specifically, detailed cash flows for Projects A and B are given below. Project A: Initial Cost of $323,120. annual benefit of $50,000 for 15 years Project B: Initial Cost of $494,310. annual benefit of $70,000 for 15 years Also, the table below apply to all projects (A through F). The data can be interpreted as follows: the IRR on the incremental investment from project C to D is 13%. IRR on IRR on Increments of Investment overall Project Compared With Project Investment A B C D E A ? B 11% ? 11% 9% 11% D 13% 11% 15% 13% E 19% 16% 16% 14% F 15% 10.5% 14% 13% 9% 6% 9.50% First, calculate both the IRR for Project A and the Increment IRR from Project A to Project B. Next, Use the table to decide which project should be selected. MARR for XYZ is set at 10% IRR(Project A) = 9% IRR(Project A) = 11% IRR(Project A) = 12% IRR(Project A) = 13% IRR(Increament A to B) = 8% IRR(Increament A to B)=9% IRR(Increament A to B) = 10% IRR(Increament A to B) = 11% Final Selection is Proect B Final Selection is Project C Final Selection is Project D Final Selection is Project F
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