Question 1

The management at Luke Products Inc. is looking at the financials for an innovative new diaper-changing station. The expected life cycle forthe product is four years. The initial projected product design costs are $500,000. Management typically uses a discount rate of 10% for allnew product financials.

a. Using the table below: Calculate the projected NPV, Payback time and IRR.

Year	Projected Cash In-Flows
1	130,000
2	250,000
3	300,000
4	100,000

b. Using the table below: If the product design costs are $250,000. Use a discount rate of 9% for the projected cash in-flows. Assume a five-year lifespan.Calculate the projected NPV, the payback time, and the IRR.

Year	Projected Cash In-Flows
1	120,000
2	90,000
3	75,000
4	50,000
5	20,000