Business Finance
Calculate the NPV for Various Projects

Question Description

Calculate the following problems using Microsoft® Excel®:

  • Calculate the NPV for each project and determine which project should be accepted.

Project A Project B Project C Project D

Inital Outlay (105,000.000) (99,000.00) (110,000.00) (85,000.00)

Inflow year 1 53,000.00 51,000.00 25,000.00 45,000.00

Inflow year 2 50,000.00 47,000.00 55,000.00 50,000.00

Inflow year 3 48,000.00 41,000.00 15,000.00 30,000.00

Inflow year 4 30,000.00 52,000.00 21,000.00 62,000.00

Inflow year 5 35,000.00 40,000.00 35,000.00 68,000.00

Rate 7% 10% 13% 18%

  • Your company is considering three independent projects. Given the following cash flow information, calculate the payback period for each. If your company requires a three-year payback before an investment can be accepted, which project(s) would be accepted?

Project D Project E Project F

Cost 205,000.00 179,000.00 110,000.00

Inflow year 53,000.00 51,000.00 25,000.00

Inflow year 2 50,000.00 87,000.00 55,000.00

Inflow year 3 48,000.00 41,000.00 21,000.00

Inflow year 4 30,000.00 52,000.00 9,000.00

Inflow year 5 24,000.00 40,000.00 35,000.00

  • Using market value and book value (separately), find the adjusted WACC, using 30% tax rate.

Component Balance Sheet Value Market Value Cost of Capital

Debt 5,000,000.00 6,850,000.00 8%

Preferred Stock 4,000,000.00 2,200,00.00 10%

Common Stock 2,000,000.00 5,600,000.00 13%

Final Answer

Attached.

Initial Outlay
Inflow year 1
Inflow year 2
Inflow year 3
Inflow year 4
Inflow year 5
Rate
NPV =

Project A
Project B
Project C
$ 105.000,00
99000
110000
$ 53.000,00
51000
25000
$ 50.000,00
47000
55000
$ 48.000,00
41000
15000
$ 30.000,00
52000
21000
$ 35.000,00
40000
35000
7%
10%
13%
$285.228,32
$275.364,07
$217.469,00

The project that should be selected is Project B as it has a high Net Present Value

Project D
85000
45000
50000
30000
62000
68000
18%
$239.006,08

Project D

Cost
Inflow year 1
Inflow year 2
Inflow year 3
Inflow year 4
Inflow year 5

Project E

2050...

Dr_TanyaZam (8250)
UC Berkeley

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