In: Finance
Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for both products is 14 percent. |
Project A: | Nagano NP-30. |
Professional clubs that will take an initial investment of $650,000 at Year 0. | |
For each of the next 5 years, (Years 1-5), sales will generate a consistent cash flow of $285,000 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 $680,000 at Year 0. | |
Cash flow at Year 1 is $200,000. In each subsequent year, cash flow will grow at 10 percent per year. |
|
Introduction of new product at Year 6 will terminate further cash flows from this project. |
Year | NP-30 | NX-20 | ||||
0 | –$ | 650,000 | –$ | 680,000 | ||
1 | 285,000 | 200,000 | ||||
2 | 285,000 | 220,000 | ||||
3 | 285,000 | 242,000 | ||||
4 | 285,000 | 266,200 | ||||
5 | 285,000 | 292,820 | ||||
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 |