Question: You are evaluating 2 Machines using Incremental Replacement Analysis. Each machine has a ten year life and you plan to keep whichever machine you decide

You are evaluating 2 Machines using Incremental Replacement Analysis. Each machine has a ten year life and you plan to keep whichever machine you decide on for the full 10 years. The cash flows for each machine are summarized in the following table:

	A	B
Initial cost	$3000	$2000
Annual Benefit	$700	$600
Annual Cost	$100	$125
Salvage Value	$500	$100

What is the Incremental Rate of Return between A and B?

	1.	4.3%
	2.	5.2%
	3.	11.7%
	4.	16.2%

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