Alternatives based on incremental present worth

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Reference no: EM131919973

Please answer the following using incremental Present worth by hand calculations with detailed explanations please. This is for an exam review.

Three different projects are being considered for Quality Computer Accessories, Inc. Using the incremental rate of return method, determine the proper alternative to select if the MARR is 6% per year, compounded annually. The projects are mutually exclusive: at most, only one project can be selected or none of the projects must be selected. Cash flow diagrams are not required but you can do them if you prefer. (The solution must be shown in logical order and must be appropriately documented. Clearly label each comparison made and the alternative selected in each case. Note that a significant number of points will be deducted if the comparison made at any point in the solution is not correct. Show all work, including factor notation, equations, values of factors, etc.)

(i) Compare the alternatives based on the incremental present worth (PW).

(ii) Since there is positive cash flow, start by comparing the least expensive alternative to the Do-Nothing (DN) alternative.

(iii) State which project is finally selected.

The selected project is __________.

Project A Project B Project C

First Cost ($) 175,000 135,000 195,000

Annual Income ($/yr) 28,000 21,000 31,000

Life all at 15 years

Reference no: EM131919973

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