Question

Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for both projects is 11 percent.

Project A: Nagano NP-30. Professional clubs that will take an initial investment of $980,000 at Time 0. 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 $718,000 at Time 0. Introduction of new product at Year 6 will terminate further cash flows from this project.

Year | NP-30 | NX-20 | ||||

0 | –$ | 980,000 | –$ | 718,000 | ||

1 | 351,000 | 267,000 | ||||

2 | 341,000 | 283,000 | ||||

3 | 316,000 | 267,000 | ||||

4 | 314,000 | 249,000 | ||||

5 | 224,000 | 192,000 | ||||

NP-30 | NX-20 | ||||||

NPV | $ | $ | |||||

IRR | % | % | |||||

PI | |||||||

What is the incremental IRR of investing in the larger project?
**(Do not round intermediate calculations. Enter your answer
as a percent rounded to 2 decimal places, e.g.,
32.16.)**

Incremental IRR
%

Answer #1

Consider two mutually exclusive new product launch projects that
Nagano Golf is considering. Assume the discount rate for both
projects is 12 percent.
Project A: Nagano NP-30 Professional clubs that will take an
initial investment of $940,000 at Time 0. 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 $650,000 at Time 0. Introduction of new
product at Year 6...

Consider two mutually exclusive new product launch projects that
Nagano Golf is considering. Assume the discount rate for both
projects is 13 percent.
Project A: Nagano NP-30. Professional clubs that will take an
initial investment of $1,000,000 at Time 0. 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 $736,000 at Time 0. Introduction of new
product at Year 6...

Consider two mutually exclusive new product launch projects that
Nagano Golf is considering. Assume the discount rate for Nagano
Golf is 16 percent.
Project A:
Nagano NP-30.
Professional clubs that will take an initial investment of
$670,000 at time 0.
Next five years (Years 1–5) of sales will generate a consistent
cash flow of $305,000 per year.
Introduction of new product at Year 6 will terminate further
cash flows from this project
Project B:
Nagano NX-20.
...

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...

Consider two mutually exclusive R&D projects that Savage
Tech is considering. Assume the discount rate for both projects is
9 percent.
Project A:
Server CPU .13 micron processing project
By shrinking the die size to .13 micron, the company will be
able to offer server CPU chips with lower power consumption and
heat generation, meaning faster CPUs.
Project B:
New telecom chip project
Entry into this industry will require introduction of a new
chip for cell phones. The know-how will...

Consider two mutually exclusive R&D projects that Savage
Tech is considering. Assume the discount rate for both projects is
15 percent.
Project A: Server CPU .13 micron processing project By shrinking
the die size to .13 micron, the company will be able to offer
server CPU chips with lower power consumption and heat generation,
meaning faster CPUs.
Project B: New telecom chip project Entry into this industry
will require introduction of a new chip for cell phones. The
know-how will...

Consider two mutually exclusive R&D projects that Savage
Tech is considering. Assume the discount rate for both projects is
13 percent.
Project A:
Server CPU .13 micron processing project
By shrinking the die size to .13 micron, the company will be
able to offer server CPU chips with lower power consumption and
heat generation, meaning faster CPUs.
Project B:
New telecom chip project
Entry into this industry will require introduction of a new chip
for cell phones. The know-how will...

Consider two mutually exclusive R&D projects that Savage tech
is considering. assume the discount rate for both projects is 11
percent
Project A
Server CPU .13 micron processing project by shrinking the die
size to .13 micron, the company will be able to offer server CPU
chips with lower power consumption and heat generation, meaning
faster CPUs
Project B New telecom chip project
Entry into this industry will require introduction of a new
chip for cell phones. The know how...

Consider two mutually exclusive R&D projects that Savage
Tech is considering. Assume the discount rate for both projects is
13 percent.
Project A:
Server CPU .13 micron processing project
By shrinking the die size to .13 micron, the company will be
able to offer server CPU chips with lower power consumption and
heat generation, meaning faster CPUs.
Project B:
New telecom chip project
Entry into this industry will require introduction of a new
chip for cell phones. The know-how will...

NPV versus IRR Consider the
following cash flows on two mutually exclusive projects for the
Bahamas Recreation Corporation. Both projects require an annual
return of 15 percent.
YEAR
DEEPWATER FISHING
NEW SUBMARINE RIDE
0
−$835,000
−$1,650,000
1
450,000
1,050,000
2
410,000
675,000
3
335,000
520,000
As a financial analyst for the company, you are asked the
following questions.
If your decision rule is to accept the project with the greater
IRR, which project should you choose?
Since you are fully...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 2 minutes ago

asked 7 minutes ago

asked 13 minutes ago

asked 16 minutes ago

asked 17 minutes ago

asked 20 minutes ago

asked 23 minutes ago

asked 41 minutes ago

asked 54 minutes ago

asked 58 minutes ago

asked 1 hour ago

asked 1 hour ago