Problem 5-19 Comparing Investment Criteria

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 $580,000 at Year 0.
	For each of the next 5 years, (Years 1-5), sales will generate a consistent cash flow of $215,000 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 $440,000 at Year 0.
	Cash flow at Year 1 is $130,000. 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	$ 580,000	$ 440,000
1	215,000	130,000
2	215,000	143,000
3	215,000	157,300
4	215,000	173,030
5	215,000	190,333

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.)

Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for both products is 14 percent. Project Nagano NP-30. A: Professional clubs that will take an initial investment of $580,000 at Year 0. For each of the next 5 years, (Years 1-5), sales will generate a consistent cash flow of $215,000 per year. Introduction of new product at Year 6 will terminate further cash flows from this project. Project Nagano NX-20. B: High-end amateur clubs that will take an initial investment of $440,000 at Year 0. Cash flow at Year 1 is $130,000. 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. 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.)