Let's solve the problem step by step: ### Step 1: **Order the Alternatives by First Cost** Incremental analysis is performed by ranking the alternatives in order of increasing initial (first) cost: - Do-nothing: $0 - D: $5,000 - B: $7,500 - A: $10,000 - C: $10,000 ### Step 2: **Eliminate Dominated Alternatives** If two alternatives have the same cost, the one with the higher benefit or higher ROR is preferred. Here, A and C both have a first cost of $10,000: - A: Annual benefit = $1,843, ROR = 13% - C: Annual benefit = $1,955, ROR = 14.5% So, **A is dominated by C** and should be eliminated. Now, the order is: - Do-nothing: $0 - D: $5,000 - B: $7,500 - C: $10,000 ### Step 3: **Select First Increment for Analysis** Incremental analysis starts with the lowest-cost alternative and moves up. We examine the increment between each pair to find the first one to analyze. - Compare D with Do-nothing, but D's ROR (9.0%) is less than MARR (11.5%) so D is not attractive. - Next, compare B with D: - First cost difference = $7,500 - $5,000 = $2,500 - Increment = B - D So, the **first increment to be examined is D-A, but A is eliminated.** Next, we check D-B. ### Step 4: **Which Increment to Examine First?** So, the correct increment to examine first is **D-B**. However, since D's ROR < MARR, eliminate D and move to the next two lowest cost alternatives: - B and C. So, **B-C** is the first increment to be examined. --- ## **Final Answer** **B-C** This matches the option: - **B-C** (Correct choice) --- ### **Explanation** - List alternatives by increasing cost. - Eliminate dominated alternatives (A is dominated by C). - Start with the lowest two alternatives above MARR. - D's ROR is below MARR, so skip D and compare B and C. **Therefore, the correct answer is:** > **B-C**