Given the following time events and incremental cash flow, if the MARR is 12% per year, which alternative should be selected on
the basis of rate of return? Assume alternative B requires the extra $7,000 initial investment. (You can use Excel). Year Incremental CFB-CFA 0 -7,000 1 +1,500 2 +1,500 3 +1,500 4 +1,500 5 +5,000
1 answer:
Answer:
Explanation:
I have attached a screenshot of the spreadsheet I used.
First, input each incremental cashflow in its own cell,
Input the MARR rate as well
To determine if accepting alternative B is worth it or not based on rate of return, use IRR (Internal rate of return) function on excel by typing "=IRR" and select the array of cells containing the cashflows. IRR is 13.84% is positive and it means that alternative B is more profitable since the IRR is greater than the MARR of 12%
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