Comparing Investment Criteria Consider the following cash flows of two mutually exclusive projects for Tadcaster Rubber Company. Assume the discount rate for Tadcaster Rubber Company is 10 per cent.

Year Dry Prepreg

(€)

Solvent Prepreg

(€)

0 –

800,000

–600,000 1 500,000 400,000 2 300,000 600,000 3 900,000 200,000

(a) Calculate the payback period. Which project should be taken?

(b) Calculate the NPV. Which project should be taken?

(c) Calculate the IRR. Which project should be taken?

(d) Calculate the incremental IRR. Is incremental IRR analysis necessary? Please conduct the analysis.