Calculate the following problems using Microsoft® Excel®: Calculate the NPV for each project and determine which project should be accepted.

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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 AProject BProject CProject D
Inital Outlay(105,000.000)(99,000.00)(110,000.00)(85,000.00)
Inflow year 153,000.0051,000.0025,000.0045,000.00
Inflow year 250,000.0047,000.0055,000.0050,000.00
Inflow year 348,000.0041,000.0015,000.0030,000.00
Inflow year 430,000.0052,000.0021,000.0062,000.00
Inflow year 535,000.0040,000.0035,000.0068,000.00
Rate7%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 DProject EProject F
Cost205,000.00179,000.00110,000.00
Inflow year 153,000.0051,000.0025,000.00
Inflow year 250,000.0087,000.0055,000.00
Inflow year 348,000.0041,000.0021,000.00
Inflow year 430,000.0052,000.009,000.00
Inflow year 524,000.0040,000.0035,000.00
  • Using market value and book value (separately), find the adjusted WACC, using 30% tax rate.
ComponentBalance Sheet ValueMarket ValueCost of Capital
Debt5,000,000.006,850,000.008%
Preferred Stock4,000,000.002,200,00.0010%
Common Stock2,000,000.005,600,000.0013%

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Instructions 1. You have two problems - one on each tab of this Excel file. 2. Please show your work in the cells. Use Excel formulas instead of writing the values/answers directly in the cell. The instructor will then know where you made a mistake and provide you valuable feedback and partial credit (if Total Points: 8 Company X is paying an annual dividend of $1.35 and has decided to pay the same amount forever. How much shou Dividend Rate of Return $ 1.35 0.095 Answer: $ 14.21 Refer to the Solved Example 2 on Page 184 of your text. You want to purchase common stock of Company X and hold it for 7 years. The company just announced that they w How much should you pay for the stock, if you will be able to sell the stock for $28 at the end of seven years and you Future Price Dividend Rate of Return (r) Number of years (n) PRICE = ANSWER = $ $ 28.00 6.00 0.11 9 $ $ 28.00 43.03 x 0.434 + $ 6.00 x 5.146 Refer to the Solved Example 1 on Page 182 of your text. =B4 FORMULAS =(1/(1+B6)^(B7-1)) =B5 =(1-D11)/B6 Instructions 1. You have three problems - one on each tab of this Excel file. 2. Please show your work in the cells. Use Excel formulas instead of writing the values/answers directly in the cell. The instructor will then know where you made a mistake and provide you valuable feedback and partial credit (if 3. It is recommended to watch the assigned videos in week # 4. Total Points: 10 e feedback and partial credit (if appropriate). 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% Answer: Refer to the Solved Example 9.2 on pg. 265 of your text. Project B (99,000.00) 51,000.00 47,000.00 41,000.00 52,000.00 40,000.00 10% Project C (110,000.00) 25,000.00 55,000.00 15,000.00 21,000.00 35,000.00 13% Project D (85,000.00) 45,000.00 50,000.00 30,000.00 62,000.00 68,000.00 18% Your company is considering three independent projects. Given the following cash flow information, calculate the pa If your company requires a three-year payback before an investment can be accepted, which project(s) would be acce Cost Inflow year 1 Inflow year 2 Inflow year 3 Inflow year 4 Inflow year 5 Payback Period Project D 205,000.00 53,000.00 50,000.00 48,000.00 30,000.00 24,000.00 Answer: Refer to the Solved Example 9.1 on pg. 259 of your text. Calculations Year 1 Year 2 Year 3 Year 4 Year 5 Formulas Year 1 Year 2 Year 3 Year 4 Year 5 Project E 179,000.00 51,000.00 87,000.00 41,000.00 52,000.00 40,000.00 ng cash flow information, calculate the payback period for each. accepted, which project(s) would be accepted? Project F 110,000.00 25,000.00 55,000.00 21,000.00 9,000.00 35,000.00 Using market value and book value (separately), find the adjusted WACC, using 30% tax rate. Component Debt Preferred Stock Common Stock Balance Sheet Value 5,000,000.00 4,000,000.00 2,000,000.00 Refer to the Solved Example 7 on Page 334 of your text. Book Value Weights Debt Preferred Stock Common Stock Market Value 6,850,000.00 2,200,000.00 5,600,000.00 C, using 30% tax rate. Cost of Capital 8% 10% 13% TAX 30% ANSWER Market Value Weights Debt Preferred Stock Common Stock Adjusted WACC Market Value Book Value ANSWER Adjusted WACC
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