ABSTRACT
This chapter deals with related concepts such as minimum attractive rate of return (MARR) and incremental analysis (IA). When compared against its counterparts like that of present worth or equivalent uniform annual cost, rate of return offers a more thorough and coherent picture of the nature of the investment. Rate of return is the most common metric used to judge investment performance in the financial world. Internal rate of return (IRR) implies that the equivalent uniform annual worth should also be equal to zero at this rate. The present worth of cost is equal to the present worth of benefit when the rate of return is equal to the IRR. Incremental analysis deals with computing the IRR on the difference between the alternatives. The chapter also considers an application of IA to a problem involving alternatives with different useful lives.
