How do I calculate Incremental IRR in this problem? (Solutions included).?

Question

For #6.5:

1) http://f.imgtmp.com/LVast.jpg
2) http://f.imgtmp.com/BPVz7.jpg,

How do I get the Incremental Internal Rate of Return? More specifically, how do I get an Incremental IRR of 1.7% from the D - A part?

Any help would be greatly appreciated!
Thanks in advance!

Answer 1

I do not usually visit external links with embedded images for the sake of securing my computer



You can however update this question to include the cash flows for Project A and D



If you have the cash flows for project A and project D, you can go ahead and use this online Incremental IRR calculator to find your answer. The link to calculator is here at http://thinkanddone.com/finance/online-incremental-irr-calculator.html



If you have a BA II Plus and if you already know how to find IRR with it then finding incremental IRR with TI BA II plus is nothing more than find IRR of the resulting cash flows from D-A. That mean you subtract respective cash flows from each project to find new cash flows. And example follows that explains this



Project A cash flows

-32000 6000 6000 6000 6000 6000 6000



Project B cash flows

-50000 10000 10000 10000 10000 10000 10000



Project B-A cash flows

-18000 4000 4000 4000 4000 4000 4000



Now you are tasked with finding Incremental IRR for B-A which is nothing more than finding IRR for the cash flow that resulted from the differences of respective cash flows of



-18000 4000 4000 4000 4000 4000 4000



Here is the three IRR results for the example above



Project A:

IRR = 3.47%

Project B:

IRR = 5.47%

Project B-A:

Incremental IRR = 8.89%

Answer 2

Incremental Irr

Answer 3

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Start by calculating the incremental cash flows - i.e. CF from larger project - CF from smaller project From there, calculate the IRR the same way you would normally. You should have another figure to compare this to - like the increase in NPV (%)

Answer 4

Which of the computational methods do we use to find the incremental IRR of the given projects and which of the two projects is preferred by IRR with the given MARR ?

Project A -18000 5000 5500 3600 4300 7300

project B -12000 3600 3800 600 1000 8500

MARR 12%



Please answer this and also elaborate the concept..

Answer 5

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