You have been requested to offer a recommendation of one of the mutually exclusive industrial sanitation control systems that follow. If the MARR is 15 \% per year, which system would you select? Use the IRR method. (6.5)
| Gravity-fed | Vacuum-led | |
| Capital investment | $24,500 | $37,900 |
| Annual receipts less expenses | 8,000 | 8,000 |
| Life (in years) | 5 | 10 |
| IRR | 18.9% | 16.5% |
Rank order: Gravity-fed (G), Vacuum-led (V)
The IRR of the gravity-fed exceeds 15 \%, so it is acceptable. We must next consider the incremental difference, \Delta(\mathrm{V}-\mathrm{G}) as follows: 0=-\$ 13,400+ \$ 24,500\left(P / F, i^{\prime}, 5\right). The IRR on this increment is 12.8 \%, so we reject vacuum-led and stick with gravity-fed as our choice.