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Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume that the discount rate for Nagano Golf is 16 percent Project A Nagano NP-30. Professional clubs that will take an initial investment of $971,000 at time O Next five years (years 1-5) of sales will generate a consistent cash flow of $440,000 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 $700,000 at time 0. Cash flow at year 1 is $290,000 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 0 1 2 NP-30 -$971,000 440,000 440,000 440,000 440,000 440,000 NX-20 -$700,000 290,000 319,000 350,900 385,990 424,589 Complete the following table: (Do not found intermediate calculations. Round the "P" answers to 3 decimal places and other answers to 2 decimal places. Omit $ sign in your response. Omit "%" sign in your response.) Net present value Internal rate of return. Incremental internal rate of return Profitability index NP-30 $ 469.689 35.31% 1484 NX-20 427206 38.19 1610 2.86% Implications Accept NP-30 Accept NX-20 Reject NX-20 Reject NX-20

Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume that the discount rate for Nagano Golf is 16 percent Project A Nagano NP-30. Professional clubs that will take an initial investment of $971,000 at time O Next five years (years 1-5) of sales will generate a consistent cash flow of $440,000 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 $700,000 at time 0. Cash flow at year 1 is $290,000 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 0 1 2 NP-30 -$971,000 440,000 440,000 440,000 440,000 440,000 NX-20 -$700,000 290,000 319,000 350,900 385,990 424,589 Complete the following table: (Do not found intermediate calculations. Round the "P" answers to 3 decimal places and other answers to 2 decimal places. Omit $ sign in your response. Omit "%" sign in your response.) Net present value Internal rate of return. Incremental internal rate of return Profitability index NP-30 $ 469.689 35.31% 1484 NX-20 427206 38.19 1610 2.86% Implications Accept NP-30 Accept NX-20 Reject NX-20 Reject NX-20

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 19E
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4 Book Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume that the discount rate for Nagano Golf is 16 percent Project A Nagano NP-30. Professional clubs that will take an initial investment of $971,000 at time 0. Next five years (years 1-5) of sales will generate a consistent cash flow of $440,000 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 $700,000 at time 0. Cash flow at year 1 is $290,000. 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 e 1 2 3 4 NP-30 -$971,000 440,000 440,000 440,000 440,000 440,000 NX-20 -$700,000 290,000 319,000 350,900 Net present value Internal rate of return 385,990 424,589 Complete the following table: (Do not round intermediate calculations. Round the "P" answers to 3 decimal places and other answers to 2 decimal places. Omit $ sign in your response. Omit % sign in your response.) NP-30 Incremental internal rate of return Profitability index 469.689 35.33% 1484 NX-20 4272069 3819 1610 2.86% Implications Accept NP-30 Accept NX-20 Reject NX-20 Reject NX-20 View
Transcribed Image Text:4 Book Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume that the discount rate for Nagano Golf is 16 percent Project A Nagano NP-30. Professional clubs that will take an initial investment of $971,000 at time 0. Next five years (years 1-5) of sales will generate a consistent cash flow of $440,000 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 $700,000 at time 0. Cash flow at year 1 is $290,000. 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 e 1 2 3 4 NP-30 -$971,000 440,000 440,000 440,000 440,000 440,000 NX-20 -$700,000 290,000 319,000 350,900 Net present value Internal rate of return 385,990 424,589 Complete the following table: (Do not round intermediate calculations. Round the "P" answers to 3 decimal places and other answers to 2 decimal places. Omit $ sign in your response. Omit % sign in your response.) NP-30 Incremental internal rate of return Profitability index 469.689 35.33% 1484 NX-20 4272069 3819 1610 2.86% Implications Accept NP-30 Accept NX-20 Reject NX-20 Reject NX-20 View
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