Question: Two mutually exclusive alternatives are being considered. Both have lives of 5 years. Alternative A has a first cost of $2500 and annual benefits of

Two mutually exclusive alternatives are being considered. Both have lives of 5 years. Alternative A has a first cost of $2500 and annual benefits of $746. Alternative B costs $6000 and has annual benefits of

$1664. The minimum attractive rate of return is 8%.

(a) What is the incremental rate of return between the two alternatives?

(b) Which alternative should be selected?

Please explain your response a step by step.

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