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You are evaluating 2 Machines using Incremental Replacement Analysis. Each machine has a ten year life and you plan to keep whichever machine you decide
You are evaluating 2 Machines using Incremental Replacement Analysis. Each machine has a ten year life and you plan to keep whichever machine you decide on for the full 10 years. The cash flows for each machine are summarized in the following table:
A | B | |
Initial cost | $3000 | $2000 |
Annual Benefit | $700 | $600 |
Annual Cost | $100 | $125 |
Salvage Value | $500 | $100 |
What is the Incremental Rate of Return between A and B?
1. | 4.3% | |
2. | 5.2% | |
3. | 11.7% | |
4. | 16.2% |
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