Question

1. In RoR analysis, IRR is determined based on assumption that (a) EUAB/EUAC=1 (c) EUAB=EUAC (b) EUAW=0 (d) all of given 2. While performing incremental analysis, (a) alternative with smaller cost is added into other with larger cost (b) alternative with smaller cost is subtracted from other with larger cost (c) alternative with larger cost is added into other with smaller cost (d) none of all 3. Incremental analysis is perform on three alternative (A, B and C) and AB/Cc =1.6 and AB/C/A-3) -0.6 are calculated. Based on this analysis, the best alternative is (a) A (6)B (c) (d) cannot decide based on given information 4. Alternative A and B have initial cost of $2000 and $4000. IRR of both alternative is 12.5% and 15% respectively. If MARR is 10%, according to RoR analysis (a) B is preferable compared to A (c) Both A and B are equivalent (b) A is preferable compared to B (d) need to perform increment analysis

Answer 1

1. ANSWER:c EUAB=EUAC

ROR ,ie. Rate of Return on a project is its Internal Rate of Return, IRR

IRR is the % age rate at which the Net Present Values(NPV) of both the cash inflows & outflows are equal.

when, it is natural that even the Equivalent Uniform Annual Benefits & Equivalent Uniform Annual Costs will be equal.

if NPVs are same, EUAC/B will be same.

Hence answer c.

2.ANSWER: b.alternative with smaller cost is subtracted from other with larger cost.

to assess & study the increment or addition over the existing costs & benefits --so as to justify the new investment

3. ANSWER: a.    A
B/C	B-C	1.6
B/A	A-B	0.6
A scores above B which ,in turn,is above C
A > B > C
So, the best alternative is A

4.ANSWER: b. A is preferable compared to B

as its IRR 12.5% > MARR 10% &

the initial investment A ($ 2000) < B ($ 4000)