# Calculate the following problems using Microsoft® Excel®: 3 Problems

*label*Business Finance

*timer*Asked: Jan 5th, 2018

*account_balance_wallet*$35

**Question description**

**Purpose of Assignment**** **

The purpose of this assignment is to allow the students to become familiar with and practice the measurement of Net Present Value (NPV), payback, and Weighted Average Cost of Capital (WACC) using Microsoft^{®} Excel^{®}.** **

**Assignment Steps**** **

**Resources: **Microsoft^{®} Excel^{®}, Capital Budgeting Decision Models Template** **

**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 1 | 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% |

**Click **the Assignment Files tab to submit your assignment.

## Tutor Answer

Attached.

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

Initial Outlay

Inflow year 1

Inflow year 2

Inflow year 3

Inflow year 4

Inflow year 5

Rate

NPV =

Project A

(105,000.00)

53,000.00

50,000.00

48,000.00

30,000.00

35,000.00

7%

$75,228.32

Answer:

Accept project B.

Project B

(99,000.00)

51,000.00

47,000.00

41,000.00

52,000.00

40,000.00

10%

$77,364.07

Project C

(110,000.00)

25,000.00...

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