Determine the best alternative among the options in the tablebelow if the MARR is 6%.
| Option | A | B | C |
| Initial cost | $2500 | $4000 | $5000 |
| Annual net benefits | $410 | $639 | $700 |
| | | |
| n= 20 years. | | | |
| | | |
| NPV= | | | |
| | | |
| IRR= | | | |
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| | | |
| NPV |
| i | A | B | C |
| 0% | | | |
| 1% | | | |
| 2% | | | |
| 3% | | | |
| 4% | | | |
| 5% | | | |
| 6% | | | |
| 7% | | | |
| 8% | | | |
| 9% | | | |
| 10% | | | |
| 11% | | | |
| 12% | | | |
| 13% | | | |
| 14% | | | |
| 15% | | | |
| 16% | | | |
| 17% | | | |
| 18% | | | |
| 19% | | | |
| 20% | | | |
| 21% | | | |
| 22% | | | |
| 23% | | | |
| 24% | | | |
| 25% | | | |
a) Using Excel, construct a choice table for interest rates from 0%to 25% showing the NPV of each option for each interest rate usingthe NPV function. Based on the table, state the range of interestrates over which each option should be chosen.
b) Using Excel, plot the values for the three options for a rateinterest ranging from 1% to 25%. This table will plot the NPV ofeach option as a function of interest rate. On the plot, label theinternal rate of return for each option. Interpret the results ofthe graph.
c) In Excel, use the IRR function that you have to perform a rateof return analysis on the three options.The MARR=6%. Show thecalculated values of each internal rate of return, expressed to 2decimal places. Explain any decision to consider or reject anoption.
