An investor is considering two mutually exclusive projects. He can obtain a 6% before-tax rate of return on external investments, but he requires a minimum attractive rate of return of7% for these projects. Use a 10 year analysis period to compute the incremental rate of return from investing in Project A rather than Project B.

Transcribed Image Text:

Project A: Prot B Build Drive-Up Buy Land Photo Shop in Hawaii $48,500 Intial capital investment $58,500 6,648 30,000 8% Net uniform 0 ainual incomé Salvage value 38,000 10 years hence Computed rate of return 11%