18. Comparing Investment Criteria Consider the following cash flows of two mutually exclusive projects for Tokyo Rubber Company.Assume the discount rate for both projects is 8 percent.Year0123Dry Prepreg-$1,800,0001,080,000840,000870,000Solvent Prepreg-$715,000380,000627,000396,000a. Based on the payback period, which project should be taken?b. Based on the NPV, which project should be taken?c. Based on the IRR, which project should be taken?d. Based on this analysis, is incremental IRR analysis necessary? If yes, please conduct the analysis.

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Comparing Investment Criteria Consider the following cash flows of two mutually exclusive projects for Tokyo Rubber Company. Assume the discount rate for both projects is 8 percent. Year 0 1 2 3 Dry Prepreg -$1,800,000 1,080,000 840,000 870,000 a. Based on the payback period, which project should be taken? b. Based on the NPV, which project should be taken? c. Based on the IRR, which project should be taken? Solvent Prepreg -$715,000 380,000 627,000 396,000

Comparing Investment Criteria Consider the following cash flows of two mutually exclusive projects for Tokyo Rubber Company. Assume the discount rate for both projects is 8 percent. Year 0 1 2 3 Dry Prepreg -$1,800,000 1,080,000 840,000 870,000 a. Based on the payback period, which project should be taken? b. Based on the NPV, which project should be taken? c. Based on the IRR, which project should be taken? Solvent Prepreg -$715,000 380,000 627,000 396,000

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 7P

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