| UNIT 3: TEXTBOOK PROBLEMS |
| CHAPTER 7: PROBLEM 1b |
| | Project A | Project B |
| Discount Rate | 15% | 15% |
| Year 0 | ($15,300) | ($10,700) |
| Year 1 | $8,700 | $5,300 |
| Year 2 | $7,400 | $4,300 |
| Year 3 | $3,100 | $4,800 |
| 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 | $3,400 | $4,800 | $7,900 |
| 1 | $915 | $915 | $915 |
| 2 | $915 | $915 | $915 |
| 3 | $915 | $915 | $915 |
| 4 | $915 | $915 | $915 |
| 5 | $915 | $915 | $915 |
| 6 | $915 | $915 | $915 |
| 7 | $915 | $915 | $915 |
| 8 | $915 | $915 | $915 |
| Payback Period = |
| CHAPTER 7: PROBLEM 8 |
| Year | Project A | Project B |
| 0 | ($6,700) | ($4,600) |
| 1 | 2,100 | 1,800 |
| 2 | 3,900 | 2,300 |
| 3 | 2,700 | 1,900 |
| IRR = |
| CHAPTER 7: PROBLEM 9 |
| Discount Rate | 15% |
| Year |
| 0 (Initial Cost) | ($207,000) | $207,000 |
| 1 | 64,000 |
| 2 | 64,000 |
| 3 | 64,000 |
| 4 | 64,000 |
| 5 | 64,000 |
| 6 | 64,000 |
| 7 | 64,000 |
| 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 | $33,000 | ($33,000) |
| Economic Life | 6 | years |
| # of Souffles produced per year | 2,400 |
| 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) |
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cf_template_textbook_problems_Unit_3.xlsx
