Compute the incremental external rate of return

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Reference no: EM132032646

Jupiter Inc. has decided to acquire a new weather satellite. After considering several options it has narrowed its search to two satellites. Satellite XPTO: purchase cost of $345382 and operating costs of $21221 per year (paid at the end of each year). Satellite XYZ: purchase cost of $105164 and operating costs of $56085 per year (paid at the end of each year). Both satellites have a service life of 10 years. Based on the defender-challenger approach and given that the MARR is 3%, reinvestment rate is 11%, and minimum external rate of return is 10%, 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: EM132032646

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