Don Garlits is a landscaper. He is considering the purchase of a new commercial lawn mower, either, the Atlas or the Zippy. The minimum attractive rate of return is 8%, and the table provides all the necessary information for the two machines.

                                                   Atlas                Zippy

Initial cost                               $6700           $16,900

Annual operation and            1500               1,200

Maintenance cost

Annual benefit                        4000               4,500

Salvage value                          1000               3,500

Useful life, in years                       3                    6

(a) Determine the rate of return on the Atlas mower (to the nearest 1%).

(b) Does the rate of return on the Zippy mower exceed the MARR?

(c) Use incremental rate of return analysis to decide which machine to purchase.