Question

Step 1

**Calculation of Range of Opportunity Cost of Capital using IRR rule:**

The cash flows in the initial year or cash outlay for Year 1 and Year 2 is -$271,000 and for Year 3 is $645,000. The company has a cash outlay of $585,000 in Year 1 and $645,000 in Year 2. Using the IRR rule the incremental cash flows and the range of capital is calculated below:

**Excel Spreadsheet:**

Step 2

**Excel Workings:**

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