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
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Transcribed Image Text: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:
Project
B:
Nagano NP-30.
Professional clubs that will take an initial investment of $710,000 at Year 0.
For each of the next 5 years, (Years 1-5), sales will generate a consistent cash
flow of $310,000 per year.
Introduction of new product at Year 6 will terminate further cash flows from this
project.
Nagano NX-20.
High-end amateur clubs that will take an initial investment of $880,000 at Year
O.
Cash flow at Year 1 is $260,000. 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
3
4
5
NP-30
NX-20
-$710,000 -$ 880,000
260,000
*
310,000
310,000
310,000
310,000
310,000
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.)
14
NP-30
286,000
314,600
346,060
380,666
10
fs
NX-20
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16
40
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Transcribed Image Text:Project
B:
Year
0
1
2
3
4
5
Nagano NX-20.
High-end amateur clubs that will take an initial investment of $880,000 at Year
0.
Cash flow at Year 1 is $260,000. 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.
Payback
IRR
PI
NPV
#
3
NP-30
-$710,000-$880,000
310,000
310,000
310,000
310,000
310,000
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.)
$
14
NP-30
4
10
NX-20
fs
%
260,000
286,000
314,600
346,060
380,666
years.
%
5
WEN
NX-20
O Search
16
40
6
years
%
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