Description
Details:
Complete the following problems from Chapters 10-12 in Principles of Managerial Finance:
- Capital Budgeting Techniques: P10-2; P10-10; P10-16; P10-22
- Capital Budgeting Cash Flows: P11-3; P11-12
- Risk Refinements in Capital Budgeting: P12-2; P12-4
Must be in MS Excel with all required formulas
Please show all work for each problem.
Unformatted Attachment Preview
Purchase answer to see full attachment
Explanation & Answer
HI there!Attached please find the complete solution for all problems in the following Excel file. As per instructions, all work was done using Excel formulae. Thanks again,Selenica
Machine 1
Year
0
1
2
3
4
5
6
7
NPV
-14000
3000
3000
3000
3000
3000
3000
3000
Machine 2
Year
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
-21000
4000
4000
4000
4000
4000
4000
4000
4000
4000
4000
4000
4000
4000
4000
4000
4000
4000
4000
4000
4000
a. Determine the payback period for each machine.
Payback
Cost
Cash inflows
Machine 1
14000 /
3000 =
Machine 2
21000 /
4000 =
Payback
Machine 1
Machine 2
Cost
14000
21000
Payback Period (years)
4.67
5.25
b. Comment on the acceptability of the machines, assuming that they are
independent projects.
Machine 1 is the only machine that meets the payback criteria at 4.67 years, whereas Machine 2 has a payback pe
c. Which machine should the firm accept? Why?
The firm should accept Machine 1, because it is the only option that meets the payback criteria of 5 years.
d. Do the machines in this problem illustrate any of the weaknesses of using
payback? Discuss.
There is a huge problem in using payback period alone. For example, the ...