What is the Delta IRR of the differencebetween the cash flow of the machine withthe higher initial value and the lower initialvaluewith the following data? Benefits areconstant overall years.Machine A Machine BInitial cost$125,000$175,000Life in years3Salvage after life15%15%Benefits per year$72,000$81,000Costs per year$15,800$24,200Inflation2.50%Costs keep increasing at 2.5% every yeareven when a new machine is bought.a. 17.53%b. 21.86%c. 33.8%d. 41.75%

To find the delta IRR we take following steps - => Compute Net cash flows of both the machines .…

What is the Delta IRR of the difference between the cash flow of the machine with the higher initial value and the lower initial value with the following data? Benefits are constant overall years. Machine A Machine B Initial cost $125,000 $175,000

What is the Delta IRR of the difference between the cash flow of the machine with the higher initial value and the lower initial value with the following data? Benefits are constant overall years. Machine A Machine B Initial cost $125,000 $175,000

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: The Basic Tools Of Finance

Section: Chapter Questions

Problem 3CQQ

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Question

What is the Delta IRR of the difference
between the cash flow of the machine with
the higher initial value and the lower initial
value
with the following data? Benefits are
constant overall years.
Machine A Machine B
Initial cost
$125,000
$175,000
Life in years
3
Salvage after life
15%
15%
Benefits per year
$72,000
$81,000
Costs per year
$15,800
$24,200
Inflation
2.50%
Costs keep increasing at 2.5% every year
even when a new machine is bought.
a. 17.53%
b. 21.86%
c. 33.8%
d. 41.75%

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