# UNIT 3 TEXTBOOK PROBLEMS

**accounting teacher**

(Not rated)

(Not rated)

**UNIT 3: TEXTBOOK PROBLEMS**

**CHAPTER 7: PROBLEM 1b**

Project A | Project B | ||

Discount Rate | 15% | 15% | |

Year 0 | ($14,500) | ($9,800) | |

Year 1 | $8,500 | $4,700 | |

Year 2 | $6,800 | $4,200 | |

Year 3 | $2,800 | $4,100 | |

NPV = | ( Note: You will choose the project that has the highest NPV since it creates the most wealth.) |

CHAPTER 7: PROBLEM 2 | |||

Year | A. | B. | C. |

0 | $3,200 | $4,600 | $7,900 |

1 | $825 | $825 | $825 |

2 | $825 | $825 | $825 |

3 | $825 | $825 | $825 |

4 | $825 | $825 | $825 |

5 | $825 | $825 | $825 |

6 | $825 | $825 | $825 |

7 | $825 | $825 | $825 |

8 | $825 | $825 | $825 |

Payback Period = |

**CHAPTER 7: PROBLEM 8**

Year | Project A | Project B |

0 | ($5,200) | ($3,600) |

1 | 1,800 | 1,300 |

2 | 3,200 | 2,100 |

3 | 2,200 | 1,800 |

IRR = |

**CHAPTER 7: PROBLEM 9**

Discount Rate | 15% | |

Year | ||

0 (Initial Cost) | ($185,000) | $185,000 |

1 | 62,000 | |

2 | 62,000 | |

3 | 62,000 | |

4 | 62,000 | |

5 | 62,000 | |

6 | 62,000 | |

7 | 62,000 | |

First find the NPV | (Use the built-in NPV formula in Excel but exclude using the Year 0 cash outflow.) | |

Now calculate the Profitability Index | (Use the positive amount of the initial cost in cell C44 in the formula. You would only accept the project if the Profitability Index is above 1.) |

**CHAPTER 8: PROBLEM 1**

Cost of Souffle Maker | $27,000 | ($27,000) |

Economic Life | 6 | years |

# of Souffles produced per year | 2,300 | |

Cost to make each Souffle | $2 | |

Price of each Souffle | $7 | |

Discount Rate | 14% | |

Tax Rate | 34% | |

Step 1: First calculate the Operating Cash Flow. | ||

Step 2: Place the answer you get for your Operating Cash Flow in the year 1 thru year 6 cells below. | ||

Year 1 | ||

Year 2 | ||

Year 3 | ||

Year 4 | ||

Year 5 | ||

Year 6 | ||

Step 3: Now find the NPV. Be sure to include the initial cost by using cell C58 as it is negative. | ||

NPV = | (You will accept the project if the NPV is positive.) |

- 8 years ago

**UNIT 3 TEXTBOOK PROBLEMS**

NOT RATED

Purchase the answer to view it

- unit_3_textbook_problems.xlsx