Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume that the discount rate for Nagano Golf is 16 percent Project A Nagano NP-30. Professional clubs that will take an initial investment of $971,000 at time O Next five years (years 1-5) of sales will generate a consistent cash flow of $440,000 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 $700,000 at time 0. Cash flow at year 1 is $290,000 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 0 1 2 NP-30 -$971,000 440,000 440,000 440,000 440,000 440,000 NX-20 -$700,000 290,000 319,000 350,900 385,990 424,589 Complete the following table: (Do not found intermediate calculations. Round the "P" answers to 3 decimal places and other answers to 2 decimal places. Omit $ sign in your response. Omit "%" sign in your response.) Net present value Internal rate of return. Incremental internal rate of return Profitability index NP-30 $ 469.689 35.31% 1484 NX-20 427206 38.19 1610 2.86% Implications Accept NP-30 Accept NX-20 Reject NX-20 Reject NX-20
Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume that the discount rate for Nagano Golf is 16 percent Project A Nagano NP-30. Professional clubs that will take an initial investment of $971,000 at time O Next five years (years 1-5) of sales will generate a consistent cash flow of $440,000 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 $700,000 at time 0. Cash flow at year 1 is $290,000 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 0 1 2 NP-30 -$971,000 440,000 440,000 440,000 440,000 440,000 NX-20 -$700,000 290,000 319,000 350,900 385,990 424,589 Complete the following table: (Do not found intermediate calculations. Round the "P" answers to 3 decimal places and other answers to 2 decimal places. Omit $ sign in your response. Omit "%" sign in your response.) Net present value Internal rate of return. Incremental internal rate of return Profitability index NP-30 $ 469.689 35.31% 1484 NX-20 427206 38.19 1610 2.86% Implications Accept NP-30 Accept NX-20 Reject NX-20 Reject NX-20
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:4
Book
Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume that the discount rate for
Nagano Golf is 16 percent
Project A Nagano NP-30. Professional clubs that will take an initial investment of $971,000 at time 0. Next five years (years 1-5) of
sales will generate a consistent cash flow of $440,000 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 $700,000 at time 0. Cash flow at year 1 is
$290,000. 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
e
1
2
3
4
NP-30
-$971,000
440,000
440,000
440,000
440,000
440,000
NX-20
-$700,000
290,000
319,000
350,900
Net present value
Internal rate of return
385,990
424,589
Complete the following table: (Do not round intermediate calculations. Round the "P" answers to 3 decimal places and other
answers to 2 decimal places. Omit $ sign in your response. Omit % sign in your response.)
NP-30
Incremental internal rate of return
Profitability index
469.689
35.33%
1484
NX-20
4272069
3819
1610
2.86%
Implications
Accept NP-30
Accept NX-20
Reject NX-20
Reject NX-20
View
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 2 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education