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Problem 5-19 Comparing Investment Criteria Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for both products

Problem 5-19 Comparing Investment Criteria

Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for both products is 13 percent.

Project A: Nagano NP-30.
Professional clubs that will take an initial investment of $640,000 at Time 0.
Next five years (Years 15) of sales will generate a consistent cash flow of $275,000 per year.
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 $650,000 at Time 0.

Cash flow at Year 1 is $190,000. In each subsequent year cash flow will grow at 10 percent per year.

Introduction of new product at Year 6 will terminate further cash flows from this project.

Year NP-30 NX-20
0 $ 640,000 $ 650,000
1 275,000 190,000
2 275,000 209,000
3 275,000 229,900
4 275,000 252,890
5 275,000 278,179

Complete the following table: (Do not round intermediate calculations. Round your "PI" answers to 3 decimal places, e.g., 32.161, and other answers to 2 decimal places, e.g., 32.16. Enter your IRR answers as a percent.)

NP-30 NX-20
Payback years years
IRR % %
PI
NPV $ $

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