Question: Two mutually exclusive alternatives A and B are being considered: Year 0 1 2 3 4 5 A $2500 746 746 746 746 746 B

Two mutually exclusive alternatives A and B are being considered:

Year

0

1

2

3

4

5

A

$2500

746

746

746

746

746

B

$6000

1664

1664

1664

1664

1664

The minimum acceptable rate of return is 8%. After calculation, we can find that the internal rates of return: for A, IRRA = 15%, for B, IRRB = 12% and for BA, IRRBA = 9.8%. Which of the following statements is correct?

Select one:

a. Select neither A nor B because IRRA > MARR and IRRB > MARR

b. Select B because IRRBA > MARR

c. Select A because IRRA > IRRB

d. Select A because IRRBA > MARR

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