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Consider the two mutually exclusive alternatives given in the table below. W NO Net Cash Flow Project A1 Project A2 - $12,000
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Answer #1
N Project A1 Project A2 Difference
0 -12000 -14000 -2000
1 5000 6200 1200
2 5000 6200 1200
3 5000 6200 1200
IRR 12.0% 15.7% 36.3%

The IRR on incremental investment = 36.3%

Formula:-

N Project A1 Project A2 Difference
0 -12000 -14000 -2000
1 5000 6200 1200
2 5000 6200 1200
3 5000 6200 1200
IRR =IRR(B2:B5) =IRR(C2:C5) =IRR(D2:D5)
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