The Stefinho De Rio company is evaluating two alternatives X and Y to invest for their travel business.
Alternative X Alternative Y
Initial investment $ 1.2 million $1 million
Net annual savings $ 300,000 $250,000
Salvage value $200,000 $200,000
Project life 6 6
The MARR is 12%.
a) Calculate the PW for each alternative.
b) Calculate the IRR for each alternative.
Use interpolation (Hint: Use i = 12% to 18% for interpolation)
c) Which investment is better and why?