Create a new Tab in your Excel worksheet & place company name at the top of your worksheet. Yakima Racks is evaluating two alternative, mutually exclusive methods for a new kayak carrier frame. It has developed the following estimated after-tax cost savings for each alternative method. Project managers require an appropriately applied IRR methodology for their decisions. If the project discount rate is 11%, and the cash flows are those noted below, which method would recommend? Provide results for both traditional NPV analysis and an appropriately applied IRR analysis. Explain your recommendation fully on your worksheet. Show all cash flows and related analysis. Clearly specify your recommendation and reasoning clearly on your worksheet.

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
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**Create a new Tab in your Excel worksheet & place company name at the top of your worksheet.**

Yakima Racks is evaluating two alternative, mutually exclusive methods for a new kayak carrier frame. It has developed the following estimated after-tax cost savings for each alternative method. Project managers require an appropriately applied IRR methodology for their decisions. If the project discount rate is 11%, and the cash flows are those noted below, which method would recommend? Provide results for both traditional NPV analysis and an appropriately applied IRR analysis. Explain your recommendation fully on your worksheet.

Show all cash flows and related analysis. Clearly specify your recommendation and reasoning clearly on your worksheet.

**A: Titanium Pulley CFs: T0= (115,000), T1= 1,000; T2= 5,000; T3= 25,000; T4= 45,000; T5= 100,000**

**B: Metal Hook CFs: T0= (95,000), T1= 45,000; T2= 35,000; T3= 30,000; T4= 20,000; T5= 10,000**

- ○ Method A (Titanium Pulley) since the incremental IRR is greater than the discount rate.
- ○ Method A (Titanium Pulley) since it has a higher NPV than the Method B.
- ○ Method B (Metal Hook) since it has an IRR that is higher than Method A.
- ○ Method B (Metal Hook) since the incremental IRR is less than the discount rate.
- ○ None of the above. Specify answer clearly in your worksheet.
Transcribed Image Text:**Create a new Tab in your Excel worksheet & place company name at the top of your worksheet.** Yakima Racks is evaluating two alternative, mutually exclusive methods for a new kayak carrier frame. It has developed the following estimated after-tax cost savings for each alternative method. Project managers require an appropriately applied IRR methodology for their decisions. If the project discount rate is 11%, and the cash flows are those noted below, which method would recommend? Provide results for both traditional NPV analysis and an appropriately applied IRR analysis. Explain your recommendation fully on your worksheet. Show all cash flows and related analysis. Clearly specify your recommendation and reasoning clearly on your worksheet. **A: Titanium Pulley CFs: T0= (115,000), T1= 1,000; T2= 5,000; T3= 25,000; T4= 45,000; T5= 100,000** **B: Metal Hook CFs: T0= (95,000), T1= 45,000; T2= 35,000; T3= 30,000; T4= 20,000; T5= 10,000** - ○ Method A (Titanium Pulley) since the incremental IRR is greater than the discount rate. - ○ Method A (Titanium Pulley) since it has a higher NPV than the Method B. - ○ Method B (Metal Hook) since it has an IRR that is higher than Method A. - ○ Method B (Metal Hook) since the incremental IRR is less than the discount rate. - ○ None of the above. Specify answer clearly in your worksheet.
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