A businessman has an opportunity to invest in one of three mutually exclusive alternatives. The first alternative has a first cost of $7000, a uniform annual benefit of $2000, and a salvage value of $500. The second has a first cost of $3500, a benefit of $900 the first year, and increasing by $100 per year thereafter. Its salvage value is $400. The third alternative has a first cost of $8000, a benefit of $2000 the first year, and increasing by 2% each year thereafter. Its salvage value is $500. Assume all alternatives have a 10 year life, and the company’s MARR is 10%.

A) Use incremental rate of return analysis to determine which alternative is best. State the rates as percentages, formatted to two decimal places (i.e., xx.xx%).You can do this manually or using Excel… in either case, be sure to show all your work!

B) Plot the results on a graph for values of i from 0 – 50%, and construct a choice table. Assuming a MARR of 10%, which alternative would you choose?

C) Are the results from part “a” and “b” consistent? Briefly discuss… (in 1-2 sentences).

(if using excel please post code)