[Please include answers (showing your work as usual) in your PDF le, and have a tab (or tabs) in the Excel le you submit if you also used Excel.

[Please include answers (showing your work as usual) in your PDF file, and have a tab (or tabs) in the Excel file you submit if you also used Excel.]

Consider the following three machine alternatives contemplated for purchase and their relevant data:

Category                                              Model A                    Model B                          Model C

First cost ($)                                        3,000                         6,000                                7,000

Annual labor cost ($/yr)                    1,200                         900                                   600

Annual power cost ($/yr)                     400                         420                                   480

Annual revenues ($/yr)                      2,600                     2,600                                2,600

Salvage value ($)                                    400                        600                                   600

Life (years)                                                5                            10                                     10

Assume that the company’s MARR is 10% per year and that the three models will be available in the future without significant changes in price, operating costs, and salvage value (i.e., assume repeatability).

(a) [10 points] Find out if each model meets the company’s MARR, and eliminate any that fails to do so from further consideration. (Note: You may use the Excel built-in function IRR for this part.)

(b) [15 points] Determine which of the three alternatives should be selected by calculating the rate of return on the incremental cash flows using the built-in Excel function (IRR).