Consider the following cash flows of two mutually exclusive projects for Motorca

Question

Consider the following cash flows of two mutually exclusive projects for Motorcars. Assume the discount rate for Motorcars is 12 percent.

Year Mini-SUV Full-SUV
0 $ -313,000 $ -613,000
1 257,000 263,000
2 193,000 387,000
3 137,000 287,000


(a) Calculate the payback period. (Round your answers to 2 decimal places. (e.g., 32.16))

Payback period
Mini-SUV years
Full-SUV years

(b)

Calculate the NPV. Round your answers to 2 decimal places. (e.g., 32.16))

NPV
Mini-SUV $
Full-SUV $

(c)

Calculate the IRR. Round your answers to 2 decimal places. (e.g., 32.16))

IRR
Mini-SUV %
Full-SUV %

Explanation / Answer

a) Payback period Mini-SUV = 1 + (313-257)/193 = 1.29 years Full-SUV = 1+ (613-263)/387 = 1. 90 years b) NPV Mini-SUV = $ 167,836.6 Full-SUV = $ 134,616.4 c) IRR Mini-SUV = 45.2861% Full-SUV = 24.1400%

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