Question
The estimated capital investment and the annual expenses for three alternative designs of a diesel powered air compressor are shown, as well as the estimated
The estimated capital investment and the annual expenses for three alternative designs of a diesel powered air compressor are shown, as well as the estimated market value for each design at the end of the common 5 year useful life. Each of the design provides the same level of service. Given a MARR of 8% per year, determine the preferred alternative using the Incremental Rate of Return (IRR) method. You will receive NO credit if you do not use the IRR method in this question.
| D1 | D2 | D3 |
Initial Cost | -100,000 | -152,200 | -149,600 |
Annual Expenses | -29,000 | -12,000 | -17,900 |
Useful Life | 5 | 5 | 5 |
Salvage Value | 10,000 | 25,600 | 14,000 |
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