Selex Aerospace is considering five independent projects to improve net revenue as estimated below. (All estimates have been divided by $1000.) The company’s MARR is 15% per year. Use a hand-based solution and a spreadsheet-based analysis to determine the following:

(a) The projects that should be undertaken on the basis of IROR if the investment limit is $120,000.

(b) The overall rate of return if the funds not in­vested in a project earns at a rate of return equal to the MARR.


By hand:



(a) Find IROR for each project, rank by decreasing IROR and then select projects

within the budget constraint of $120,000.



For X: 0 = -30,000 + 9000(P/A,i*,10)

i* = 27.3%



For Y: 0 = -15,000 + 4,900(P/A,i*,10)

i* = 30.4%



For Z: 0 = -45,000 + 11,100(P/A,i*,10)

i* = 21.0%





(b) Same as for hand solution: Overall ROR = 25.3% per year

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