FastBits Electronic Company Sdn. Bhd. is evaluating new precision inspection devices to help verify package quality. The manager has obtained the following bids from four companies. All devices have a life of five years and a minimum attractive rate of return of 6%. The alternatives are mutually exclusive. Description Initial Cost (RM) Company A Company B Company C Company D 420000 100000 570000 200000 Annual Costs (RM) 900 12000 23000 9000 Net Cash Flows (RM) 105000 28000 142500 46000 IRR 7.9% 12.4% 7.9% 4.8% Determine the annual benefits of the devices from all four companies. Company A: 105900 Company B: 40000 Format: 603700 Format 40000 Company C: 165500 Format: 253500 Company D: 55000 Format: 66000 Device from which company has the highest annual benefit? D Format : A FastBits should reject the bid from which company based on the given individual IRR? D Using incremental internal rate of return analysis, from which company, if any, should the manager purchase the new precision inspection device? Use trial and error method with 6% and 12% interest rates. Understood? (Y/N) Y Format : A Format : A Format: A Step 5 Choose Company ☑ eat. A Step 1- Eliminate Company D Step 2 Rank Company from no 1-2-3 C-A-B Step 4 - Incremental IRR first comparison 8.1 Step 5 - Remove Company from selection A Repeat Step 4 - Incremental IRR 2nd comparison Demonstrate that the same company selection would be made with proper application of the Present Worth (PW) method. PW Company A 22302 Format: X-X-X Format: 5.8 Format : A PW Company B 17947 PW Company C 30267 PW Company D -6230 Thus, choose Company Format: 94902 Format: 52932 Format: 90698 Format: -3320 × Format : A