The financial data for the two plans were as follows:

• Plan 1. Retrofit the plant to adapt the new technique. Because of untested technology on a large scale, it might cost more to operate the new facility while personnel were learning the new system.

• Plan 2. Defer the retrofitting until the federal deadline, which was three years away. With expected improvement in cleaning technology and technical knowhow, the retrofitting cost would be cheaper, but there would be tough market competition, and the revenue would be less than that of Plan 1.

	Plan 1	Plan 2
Investment timing	Now	3 years from now
Initial investment	$2.5 million	$1.0 million
System life	8 years	8 years
Salvage value	$0.1 million	$0.2 million
Annual revenue	$1.5 million	$1.1 million
Annual Fox costs	$0.6 million	$0.7 million

1. While facing the government deadline for phasing out the traditional cleaning technique of circuit boards,

   1. a) What assumptions must be made to compare these two plans?

   2. b) If Foxs MARR is 15%, which option is the better choice, based on the IRR criterion?