Question

Question 1 0.15 pts Of the following equations, which will allow you to solve for the ROR of this cash flow? Year Cash Flow $-15,000 O 1 $2,500 2 $5,000 $7,500 4 $10,000 15,000 2500(P/A, i, 5) +2500 (P/G, i, 5) 0 15,000 2500(P/A, i, 5)+2500 (P/G, i, 5) 15,000 2500(P/G, i*, 5) 0 150002500(P/G, i, 5) 15,000 2500(P/A, i", 4) +2500 (P/G, i", 4) 0 15,000 2500(P/A, i, 4)+2500 (P/G, i, 4) = Ln

Answer 1

1.

Given Cash flow is geometric series

so Let I% be ROR,, then

15000 = 2500 * (P/G, I%, 5)

Third option is correct answer

2

Using IRR function in Excel

Year	Investment	Revenue	Cost	Salvage value	Net cash Flow
0	-350000				-350000
1		200000	-100000		100000
2		300000	-150000		150000
3		300000	-175000		125000
4		200000	-190000		10000
5		200000	-225000	30000	5000
IRR				IRR	5.2%

3

As incremental IRR of (B - A) is greater than MARR, therefore B should be selected

Second option is correct

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