Compute incremental external rate of return

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Reference no: EM132044486

Ganymede Inc. has decided to acquire a new weather satellite. After considering several options it has narrowed its search to two satellites.

Satellite Pluto: purchase cost of $302013 and operating costs of $21690 per year (paid at the end of each year).

Satellite Triton: purchase cost of $107101 and operating costs of $64257 per year (paid at the end of each year). Both satellites have a service life of 19 years.

Based on the defender-challenger approach and given that the MARR is 10%, reinvestment rate is 8%, and minimum external rate of return is 6%, compute the incremental external rate of return of choosing the most expensive satellite. Note: round your answer to two decimal places, and do not include spaces, percentage signs, plus or minus signs, nor commas. If your answer is 15%, write 15, not 0.15)

Reference no: EM132044486

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