The value of rate of return ‘i_r’ is now calculated by solving the above equation either manually through trial and error process with linear interpolation or using Microsoft Excel spreadsheet (already mentioned earlier). For faster calculation, the rate of return is calculated using Microsoft Excel spreadsheet after entering year-wise cash inflows and cash out flows. The value of rate of return is found to be 24.06% (using the function ‘IRR’ in Excel spreadsheet). As rate of return of the incremental cash flow is greater than MARR (20%), the incremental investment associated with alternative-4 (A4) is justified and alternative-2 (A2) is now removed from further analysis. Alternative-4 now becomes the new base alternative and is compared with next higher capital investment alternative i.e. alternative-1 (A1) with investment of Rs.7800000. The rate return of this incremental investment is calculated in same manner as above. The entire calculation is now presented in the Table 2.3.

In Table 2.3 the incremental values between the alternatives indicate the difference in cash flows between them.