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Question 1 25 points Sa Machines that have the following cost are under consideration for a new manufacturing process. Which is the best alternative using the IRR incremental comparison? Machine A Machine B First cost Semiannual operating cost Semiannual income Semiannual income gradient Salvage Value Life in year 0 a. IRR incremental = 20.9% Ob. IRR incremental = 20.9% OC. IRR incremental = 25.9% Od. IRR incremental = 22.9% $42,000 $70,000 9,000 21,000 8,000 15,000 100 100 9,000 11,000 4. 4
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Answer #1
Purpose Cash flow(A) Cash flow(B)
First cost ($42,000.00) ($70,000.00) ($28,000.00)
Semiannual net income $7,000.00 $12,000.00 $5,000.00
Semiannual net income $7,000.00 $12,000.00 $5,000.00
Semiannual net income $7,000.00 $12,000.00 $5,000.00
Semiannual net income $7,000.00 $12,000.00 $5,000.00
Semiannual net income $7,000.00 $12,000.00 $5,000.00
Semiannual net income $7,000.00 $12,000.00 $5,000.00
Semiannual net income $7,000.00 $12,000.00 $5,000.00
Semiannual net income $7,000.00 $12,000.00 $5,000.00
Salvage value $9,000.00 $11,000.00 $2,000.00
IRR

20.89%

Answer ) Option A

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