Question

Question 8 3 pts Which of the computational methods do we use to find the incremental IRR of the given projects and which of the two projects is preferred by IRR with the given MARR? O($7.000) ($10,000) 1$1.700 $3.500 2 $1.500 $4,100 3$4,200 $2,100 4 $2.900 $500 5 $300 $2,900 MARR-1196 O B-AA B-A, B o A-B, B DIA-B.A

Answer 1

Q. 8). Answer :-  Option b). B-A, B.

Explanation :- Incremental cash outflow = Cash outflow of project B - Cash outflow of project A.

= 10000 - 7000

= 3000.

Year	Incremental cash inflow = Cash inflow of project B - Cash inflow of project A
1	1800 (3500 - 1700)
2	2600 (4100 - 1500)
3	(-) 2100 (2100 - 4200)
4	(-) 2400 (500 - 2900)
5	2600 (2900 - 300

As the incremental Internal rate of return (IRR) will be positive only for incremental cash flows between project B and project A, accordingly, Project B should be selected over the project A.

Option b). B-A, B.