Year Dry Prepreg Solvent Prepreg 0 –$ 1,750,000 –$ 775,000 1 1,105,000 400,000 2 910,000 650,000 3 755,000 400,000 a. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Payback period Dry Prepreg years Solvent Prepreg years b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) NPV Dry Prepreg $ Solvent Prepreg $ c. What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) IRR Dry Prepreg % Solvent Prepreg % d. Calculate the incremental IRR for the cash flows. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Incremental IRR %
Consider the following cash flows of two mutually exclusive projects for Spartan Rubber Company. Assume the discount rate for both projects is 12 percent.
| Year | Dry Prepreg | Solvent Prepreg | ||||
| 0 | –$ | 1,750,000 | –$ | 775,000 | ||
| 1 | 1,105,000 | 400,000 | ||||
| 2 | 910,000 | 650,000 | ||||
| 3 | 755,000 | 400,000 | ||||
a. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
| Payback period | |
| Dry Prepreg | years |
| Solvent Prepreg | years |
b. What is the
| NPV | |
| Dry Prepreg | $ |
| Solvent Prepreg | $ |
c. What is the
| IRR | |
| Dry Prepreg | % |
| Solvent Prepreg | % |
d. Calculate the incremental IRR for the cash flows. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Incremental IRR %
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