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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...

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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 MicrosoftExcel.


Assignment Steps


Resources:Microsoft®Excel®, Capital Budgeting Decision Models Template,


Calculatethe 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, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,000.00)

Inflow year 1 53, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,000.00

Inflow year 2 50, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,000.00

Inflow year 3 48, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,000.00

Inflow year 4 30, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,000.00

Inflow year 5 35, XXXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX,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, XXXXXXXXXX, XXXXXXXXXX,000.00

Inflow year 53, XXXXXXXXXX, XXXXXXXXXX,000.00

Inflow year 2 50, XXXXXXXXXX, XXXXXXXXXX,000.00

Inflow year 3 48, XXXXXXXXXX, XXXXXXXXXX,000.00

Inflow year 4 30, XXXXXXXXXX, XXXXXXXXXX,000.00

Inflow year 5 24, XXXXXXXXXX, XXXXXXXXXX,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, XXXXXXXXXX,850, XXXXXXXXXX%

Preferred Stock 4,000, XXXXXXXXXX,200, XXXXXXXXXX%

Common Stock 2,000, XXXXXXXXXX,600, XXXXXXXXXX%


fin419r6wk4capitalbudgetingdecisionmodelstemplate-v1h4lnz3.xlsx
Answered Same Day Nov 10, 2021

Solution

Ashish answered on Nov 15 2021
145 Votes
Instructions
    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 appropriate).
    3. It is recommended to watch the assigned videos in week # 4.
    Total Points: 10
Problem 1 NPV
    Calculate the NPV for each project and determine which project should be accepted.
        Project A    Project B    Project C    Project D
    Initial Outlay    (105,000.00)    (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%
    NPV...
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