Consider the following four assets. Values for present worth, annual worth, and internal rate of return have been calculated for you. The annual worth and present worth calculation **assume a 10% MARR**.

A | B | C | D | |

Asset Life | 2 | 3 | 4 | 6 |

PW (10%) | -3 | 12 | 16 | 20 |

AW (10%) | -2 | 3 | 8 | 7 |

IRR | 7% | 5% | 13% | 12% |

**1) Which of these assets is a loan?**

Asset A is just a bad investment. Since MARR is greater than IRR, it doesn’t make sense for an individual to invest. Thus, the Present Worth is negative and Asset A is a bad investment.

Asset B is a loan because the Present Worth is positive even though IRR is less than MARR.

Assets C & D are investments. (PW≥0 provided that IRR≥MARR)

**2) If the MARR was 10% which assets would you purchase?**

Assets B, C, and D would be the best choices.

**3) If the MARR was 20% which asset would you purchase?**

Since MARR = 20% , choose asset B because it’s a loan.

*Notice:*

Annual worth is not required to answer these questions.

In order to choose which asset to purchase it’s important to use the following rule:

- If an asset is an investment PW≥0 and IRR≥MARR → BUY IT

- If an asset is a loan and IRR ≤MARR → BUY IT