Comparing Investment Criteria Consider the following cash fl ows of two mutually exclusive projects for Tokyo Rubber Company. Assume the discount rate for Tokyo Rubber Company is 10 percent.

Year Dry Prepreg Solvent Prepreg 0 $1,000,000 $500,000 1 600,000 300,000 2 400,000 500,000 3 1,000,000 100,000

a. Based on the payback period, which project should be taken?

b. Based on the NPV, which project should be taken?

c. Based on the IRR, which project should be taken?

d. Based on this analysis, is incremental IRR analysis necessary? If yes, please conduct the analysis. LO.1