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Three short cuts may reduce the computational burden of incremental ROR analysis. They are:

- Eliminate the do-nothing alternative if at least one other alternative has a ROR greater than or equal to the MARR.
- Eliminate any alternative that has a ROR < MARR.
- Eliminate any alternative
that is dominated by another. X dominates Y if the initial cost of X is
greater than or equal to the initial cost of Y,
__and__if the ROR of X is greater than or equal to the ROR of Y.

Example: Suppose that alternatives X, Y and Z are being considered by an investor with a MARR of 15%. The do-nothing alternative is also an option. Apply short cuts to determine which alternatives can be eliminated before performing incremental ROR analysis.

Alternative | Initial cost ($k) | ROR (%) |

X | 30 | 18 |

Y | 25 | 16 |

Z | 40 | 12 |

- Eliminate the do-nothing alternative because the ROR for another alternative > MARR.
- Eliminate Z because its ROR < MARR.
- Eliminate Y because it is dominated by X.

By applying short cuts, all alternatives except X have been eliminated and there is no need to perform the incremental ROR analysis.

__Select X__.

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Question 1.

Consider the five investment alternatives described below. Which alternatives can be eliminated from an incremental ROR analysis by applying short cuts for an investor with a MARR of 10%? Each alternative has a 5-year life and no salvage value.

Alternative | Initial cost ($k) | ROR (%) |

A | 60 | 8 |

B | 45 | 15 |

C | 50 | 18 |

D | 30 | 20 |

E | 75 | 12 |

Choose an answer by clicking on one of the letters below, or click on "Review topic" if needed.

A Can eliminate do-nothing, A and B

B Can eliminate do-nothing and E

C Can eliminate do-nothing, A and E

D Can eliminate do-nothing, B and E

Question 2.

Consider the five investment alternatives described below. Which alternatives can be eliminated from an incremental ROR analysis by applying short cuts for an investor with a MARR of 10%? Each alternative has a 5-year life and no salvage value.

Alternative | Initial cost ($k) | ROR (%) |

A | 60 | 14 |

B | 45 | 20 |

C | 50 | 18 |

D | 30 | 25 |

E | 75 | 12 |

Choose an answer by clicking on one of the letters below, or click on "Review topic" if needed.

A Can eliminate do-nothing and C

B Can eliminate do-nothing and A

C Can eliminate do-nothing and E

D Can eliminate do-nothing only

Question 3.

Consider the five investment alternatives described below. Which alternatives can be eliminated from an incremental ROR analysis by applying short cuts for an investor with a MARR of 20%? Each alternative has a 5-year life and no salvage value.

Alternative | Initial cost ($k) | ROR (%) |

A | 60 | 14 |

B | 45 | 15 |

C | 50 | 18 |

D | 30 | 16 |

E | 75 | 15 |

Choose an answer by clicking on one of the letters below, or click on "Review topic" if needed.

A Can eliminate do-nothing and A

B Can eliminate do-nothing, A and E

C Can eliminate all except do-nothing. Select do-nothing

D Can eliminate do-nothing, A, B and E