UNIT 3 TEXTBOOK PROBLEMS
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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
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