Five mutually exclusive cost alternatives that have infinite lives are under consideration for decreasing the fruit-bruising rates of a thin skin-fruit grading and packing operation (peaches, pears, apricots, etc.). The initial costs and cash flows of each alternative are available. If the MARR is 15% per year, the one alternative to select is:
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Rank Alternatives: C, A, B. D, E; perform incremental ROR analysis for n = ?
A vs. C: -2000(?i*) + 400 = 0; ?i* = 400/2000 = 20% > MARR; eliminate C
B vs. A: -1000(?i*) + 100 = 0; ?i* = 100/1000 = 10% < MARR; eliminate B
D vs. A: -3000(?i*) + 300 = 0; ?i* = 300/3000 = 10% < MARR; eliminate D
E vs. A: -4,000(?i*) + 700 = 0; ?i* = 700/4000 = 17.5% > MARR; eliminate A
Select E
Answer is (d)
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