Homework Answers
MARR = 37%
Using IRR function in Excel
| Robot X | Robot Y | Y-X | |||||||||
| Year | Investment | Revenue | Cost | Salvage value | Net cash Flow | Investment | Revenue | Cost | Salvage value | Net cash Flow | Cash Flow |
| 0 | -92000 | -92000 | -146000 | -146000 | -54000 | ||||||
| 1 | 96000 | -31000 | 65000 | 129000 | -28000 | 101000 | 36000 | ||||
| 2 | 96000 | -31000 | 65000 | 129000 | -28000 | 101000 | 36000 | ||||
| 3 | 96000 | -31000 | 44000 | 109000 | 129000 | -28000 | 47000 | 148000 | 39000 | ||
| IRR | 60.59% | 55.55% | 46.12% | ||||||||
As the Incremental IRR (46.12%) of (Y-X) is greater than MARR (37%) , so Robot Y should be selected
Showing formula in Excel
| Robot X | Robot Y | Y-X | |||||||||
| Year | Investment | Revenue | Cost | Salvage value | Net cash Flow | Investment | Revenue | Cost | Salvage value | Net cash Flow | Cash Flow |
| 0 | -92000 | =U64+V64+W64+X64 | -146000 | =Z64+AA64+AB64+AC64 | =AD64-Y64 | ||||||
| 1 | 96000 | -31000 | =U65+V65+W65+X65 | 129000 | -28000 | =Z65+AA65+AB65+AC65 | =AD65-Y65 | ||||
| 2 | 96000 | -31000 | =U66+V66+W66+X66 | 129000 | -28000 | =Z66+AA66+AB66+AC66 | =AD66-Y66 | ||||
| 3 | 96000 | -31000 | 44000 | =U67+V67+W67+X67 | 129000 | -28000 | 47000 | =Z67+AA67+AB67+AC67 | =AD67-Y67 | ||
| IRR | =IRR(Y64:Y67) | =IRR(AD64:AD67) | =IRR(AE64:AE67) | ||||||||
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