Three mutually exclusive investment alternatives are being considered. The estimated cash flows for each alternative are given below. The study period is 30 years and the firm's MARR is

17% per year. Assume repeatability and reinvestment of positive cash balances at 17% per year.

a. What is the simple payback period for Alternative 1?

b. What is the annual worth of Alternative 2?

c. What is the IRR of the incremental cash flows of Alternative 2 compared to Alternative 1?

d. Which alternative should be selected?

Alt. 1 Alt. 2 Alt. 3

Capital Investment -25,000 -60,000 -45,000

Annual Costs -12,000 -30,000 -20,000

Annual Revenues 28,000 57,500 38,000

Market Value at End of Useful Life 9,000 9,000 9,000

Useful Life, years 5 5 6

IRR 59.9% 37.7% 34.4%