External rate of return of choosing most expensive satellite

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Reference no: EM132033195

Jupiter Inc. has decided to acquire a new weather satellite. After considering several options it has narrowed its search to two satellites.

Satellite XPTO: purchase cost of $326678 and operating costs of $32679 per year (paid at the end of each year).

Satellite XYZ: purchase cost of $118006 and operating costs of $62450 per year (paid at the end of each year).

Both satellites have a service life of 12 years. Based on the defender-challenger approach and given that the MARR is 4%, reinvestment rate is 11%, and minimum external rate of return is 11%, compute the incremental external rate of return of choosing the most expensive satellite. Note: round your answer to two decimal places, and do not include spaces, percentage signs, plus or minus signs, nor commas. If your answer is 15%, write 15, not 0.15.

Reference no: EM132033195

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