Question
Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for both projects is 11 percent. Project A:
Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for both projects is 11 percent. |
Project A: | Nagano NP-30. |
| Professional clubs that will take an initial investment of $1,030,000 at Time 0. Introduction of new product at Year 6 will terminate further cash flows from this project. |
Project B: | Nagano NX-20. |
| High-end amateur clubs that will take an initial investment of $763,000 at Time 0. Introduction of new product at Year 6 will terminate further cash flows from this project. |
Year | NP-30 | NX-20 | ||||
0 | $ | 1,030,000 |
| $ | 763,000 |
|
1 |
| 361,000 |
|
| 281,000 |
|
2 |
| 351,000 |
|
| 289,000 |
|
3 |
| 326,000 |
|
| 272,000 |
|
4 |
| 329,000 |
|
| 264,000 |
|
5 |
| 239,000 |
|
| 202,000 |
|
Complete the following table: (Do not round intermediate calculations. Enter the IRR as a percent. Round your profitability index (PI) answers to 3 decimal places (e.g., 32.161) and other answers to 2 decimal places (e.g., 32.16).) |
| NP-30 |
| NX-20 | ||
NPV | $ |
|
| $ |
|
IRR |
| % |
|
| % |
PI |
|
|
|
|
|
What is the incremental IRR of investing in the larger project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).) |
Incremental IRR | % |
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