Question

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.

High-end amateur clubs that will take an initial investment of $740,000 at Time 0.

Cash flow at Year 1 is $220,000. 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	-670,000	-740,000
1	305,000	220000
2	305,000	242,000
3	305,000	266,200
4	305,000	292,820
5	305,000	322,102

SOLVE:

	NP-30	NX-20
PAYBACK	?? YEARS	?? YEARS
IRR	?? %	?? %
PI
NPV	$ ??	$ ??

Answer 1

Answer:

Workings: