Consider the following two mutually exclusive alternatives for reclaiming a deteriorating inner-city neighborhood (one of them must be chosen). Notice that the IRR for both alternatives is 27.19%. a. If MARR is 15â% perâ year, which alternative isâ better?
b. What is the IRR on the incremental cash flowâ [i. e., Îâ(YâXâ)]?
c. Which alternative should be chosen if MARR is 15% per year?
d. What is the simple payback period for eachâ alternative?
Alternative
EOY X Y
0 $105,000 $105,000
1 $50,000 $0
2 $51,000 $0
3 $70,194 $215,894
IRR 27.16% 27.16%
e. Which alternative would youâ recommend?
a. The PW of the alternative X is â$.
b. The IRR on the incremental cash flow is %.
c. The PW of the alternative X is $.
d. The simple payback for the alternative X is years.