Question

Problem 7-20 Comparing Investment Criteria

Consider the following cash flows of two mutually exclusive projects for Spartan Rubber Company. Assume the discount rate for both projects is 9 percent.

Year	Dry Prepreg			Solvent Prepreg
0	–$	1,850,000		–$	825,000
1		1,115,000			450,000
2		930,000			750,000
3		765,000			420,000

a. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

	Payback period
Dry Prepreg	years
Solvent Prepreg	years

b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

	NPV
Dry Prepreg	$
Solvent Prepreg	$

c. What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

	IRR
Dry Prepreg	%
Solvent Prepreg	%

d. Calculate the incremental IRR for the cash flows. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Incremental IRR             %

Answer 1