A firm is considering three mutually exclusive alternatives as a part of the upgradation of an existing manufacturing process.

At EOY 6, alternative 3 would be replaced with another alternative 3, having the same installation cost and net annual revenues. If the MARR is 10% per year, which alternative, if any, should be chosen? Use the incremental IRR procedure.

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Processes C1 C2 C3 Installation cost $200,000 $2,60,000 $2,80,000 Net annual revenue $76,000 $80,000 $1,00,000 Market value Useful life Calculated IRR 12 years 25% 12 years 22.8% 6 years 13.62%