Schneeberger, Inc. is considering two alternatives to increase the acceleration of its linear motor actuators. The initial investment required in alternative X is $200,000 and in Y is $150,000. The MARR = 20% per year; a total of $200,000 is available for investment; and the rates of return are i *_X = 22% and i *_Y = 25% per year.

(a) Will the rate of return on the increment of investment between alternatives X and Y be larger or smaller than i*_X ? larger or smaller than i *_Y?

(b) What is the expected i *_X-Y?