Consider the following cash flows of two mutually exclusive projects for Tokyo Rubber Company. Assume the...

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Finance

Consider the following cash flows of two mutually exclusiveprojects for Tokyo Rubber Company. Assume the discount rate forboth projects is 7 percent.
Year Dry Prepreg Solvent Prepreg
0 –$ 1,870,000 –$ 835,000
1 1,117,000 460,000
2 934,000 770,000
3 767,000 424,000

a.
What is the payback period for both projects? (Do notround intermediate calculations. Round your answers to 2 decimalplaces, e.g., 32.16.)
b.
What is the NPV for both projects? (Do not roundintermediate calculations. Round your answers to 2 decimal places,e.g., 32.16.)
c.
What is the IRR for both projects? (Do not roundintermediate calculations and enter your answers as a percentrounded to 2 decimal places, e.g., 32.16.)
d.
Calculate the incremental IRR for the cash flows. (Donot round intermediate calculations and enter your answer as apercent rounded to 2 decimal places, e.g., 32.16.)

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3.7 Ratings (382 Votes)

a Dry Year Cash flow stream Cumulative cash flow 0 1870000 1870000 1 1117000 753000 2 934000 181000 3 767000 948000 Payback period is the time by which undiscounted cashflow cover the intial investment outlay this is happening between year 1 and 2 therefore by interpolation payback period 1 0753000181000753000 181 Years Solvent Year Cash flow stream Cumulative cash flow 0 835000 835000 1 460000 375000 2 770000 395000 3 424000 819000 Payback period is the time by which undiscounted cashflow cover the intial investment outlay this is happening See Answer

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Transcribed Image Text

Consider the following cash flows of two mutually exclusiveprojects for Tokyo Rubber Company. Assume the discount rate forboth projects is 7 percent.YearDry PrepregSolvent Prepreg0–$1,870,000–$835,00011,117,000460,0002934,000770,0003767,000424,000 a.What is the payback period for both projects? (Do notround intermediate calculations. Round your answers to 2 decimalplaces, e.g., 32.16.)b.What is the NPV for both projects? (Do not roundintermediate calculations. Round your answers to 2 decimal places,e.g., 32.16.)c.What is the IRR for both projects? (Do not roundintermediate calculations and enter your answers as a percentrounded to 2 decimal places, e.g., 32.16.)d.Calculate the incremental IRR for the cash flows. (Donot round intermediate calculations and enter your answer as apercent rounded to 2 decimal places, e.g., 32.16.)

Year	Dry Prepreg		Solvent Prepreg
0	–$	1,870,000	–$	835,000
1		1,117,000		460,000
2		934,000		770,000
3		767,000		424,000