Question

Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for both products is 17 percent.

  

Project A:	Nagano NP-30.
	Professional clubs that will take an initial investment of $750,000 at Time 0.
	Next five years (Years 1–5) of sales will generate a consistent cash flow of $350,000 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 $1,000,000 at Time 0.
	Cash flow at Year 1 is $300,000. 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	NP-30			NX-20
0	–$	750,000		–$	1,000,000
1		350,000			300,000
2		350,000			330,000
3		350,000			363,000
4		350,000			399,300
5		350,000			439,230

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.)

  

	NP-30			NX-20
Payback		years			years
IRR		%			%
PI
NPV	$			$

Answer 1