In comparing three alternatives by the incremental rate of return method, an analyst is given the following information:
| Alt.1 (least costly) | Alt.2 | Alt.3 (most costly) |
Rate of Return (%): | 14.5 | 15.1 | 12.3 |
∆ROR(2-1) = 11.3; ∆AROR(3-1) = 13.9; ∆ROR(3-2) = 20.2.
(a) If the MARR is 12%, which alternative should be chosen?
(b) If the MARR is 14% which alternative should be chosen?
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