Question

2. Specialty Gases & Chemicals manufactures nitrogen trifluoride, a highly specialized gas used as an industrial cleansing agent for flat panels installed in laptop computers, televisions, and desktop monitors. The incremental cash flow associated with two alternatives for chemical storage and handling systems (identified as P3 and X3) has been calculated in S1000 units. Determine: (a) The rate of return on the incremental cash flows. (Start at i=18%) (b) Which one should be selected if the company's MARR is 25% per year. Alternative X3 requires the larger initial investment. Year Incremental Cash Flow (X3 - P3), $1000 $-4600 1100 2000

Answer 1

a:

Inc IRR

20.96%

Year	Inc. Cash flows
0	-4600
1	1100
2	1100
3	1100
4	1100
5	1100
6	1100
7	1100
8	1100
9	1100
10	$2,000.00

b: Select P3 since Incremental CF of X3 is yielding lesser returns than the MARR

AutoSave o 9.3HD Book1 - Excel Sign in - 0 X File Home Insert Draw Page Layout Formulas Data Review View Help Tell me what you want to do Share Comments £:49 0 - Percentage 3$ -% Insert - Delete - Format Paste . Calibri - 11 -A BIU - B A Font - f A = = = 0 - E Alignment =IRR(M2:M12) Conditional Format as Formatting Table - Cell Styles Sort & Find & Filter - Select Editing Clipboard Number Styles Cells N 0 P Year Inc IRR =IRR(M2:M12) м. Inc. Cash flows -4600 1100 1100 1100 1100 1100 1100 1100 1100 1100 2000