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What is the Delta IRR of the difference between the cashflow of the machine with the higher initial value and the lower initial value with
What is the Delta IRR of the difference between the cashflow of the machine with the higher initial value and the lower initial value with the following data? Benefits are constant over all years.
Machine A | Machine B | |
Initial cost | $125,000 | $175,000 |
Life in years | 3 | 6 |
Salvage after life | 15% | 15% |
Benefits per year | $72,000 | $81,000 |
Costs per year | $15,800 | $24,200 |
Inflation | 2.50% | |
Costs keep increasing at 2.5% every year | ||
even when a new machine is bought. |
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