Accounting/Economics Help
A plant engineer is considering two types of solar water heating system. The firm’s MARR is 12%. Which of the following statement is true?
a. IRR_A > IRR_B, and A is better
b. NPV_B > NPV_A, and B is better
c. Payback Period_A > Payback Period_B , and B is better
d. ΔIRR_A-B > MARR, and A is better
Homework Answers
NPV of A = -615000 + 158000*(P/A,12%,5) + 65000*(P/F,12%,5)
= -615000 + 158000*3.604776 + 65000*0.567427
= -8562.64
NPV of B = -300000 + 92000*(P/A,12%,5) - 5000*(P/F,12%,5)
= -300000 + 92000*3.604776 - 5000*0.567427
= 28802.26
As NPV of B > NPV of A, project B is better
option b is correct answer
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