You have the following projects available. Please fill in the missing space. You

Question

You have the following projects available. Please fill in the missing space. You can copy and paste the table onto a spreadsheet in Excel, and use Excel functions to solve the problem.

Project Cash Flows

Time Period

A

B

0

-$11,000

-$500,000

1

$7,000

$60,000

2

-$1,500

$90,000

3

$2,300

$170,000

4

$1,000

$230,000

5

$1,000

$205,000

6

-$300

$140,000

7

-$300

$110,000

8

-$300

$70,000

9

$400

$80,000

10

$400

Discount Rate

7.50%

8.00%

Payback Period

Discounted Payback

Profitability Index

NPV

IRR

  

     

Project Cash Flows

     

Time Period

     

A

     

B

     

0

     

-$11,000

     

-$500,000

     

1

     

$7,000

     

$60,000

     

2

     

-$1,500

     

$90,000

     

3

     

$2,300

     

$170,000

     

4

     

$1,000

     

$230,000

     

5

     

$1,000

     

$205,000

     

6

     

-$300

     

$140,000

     

7

     

-$300

     

$110,000

     

8

     

-$300

     

$70,000

     

9

     

$400

     

$80,000

     

10

     

$400

     

     

     

     

     

Discount Rate

     

7.50%

     

8.00%

     

Payback Period

     

     

     

Discounted Payback

     

     

     

Profitability Index

     

     

     

NPV

     

     

     

IRR

     

     

  

Explanation / Answer

Project A Project Cash Flows P.V. Factor P.V. of Cash flows Time Period A 0 -11000 1 -11000 1 7000 0.930232558 6511.627907 2 -1500 0.865332612 -1297.998918 3 2300 0.80496057 1851.40931 4 1000 0.74880053 748.8005298 5 1000 0.696558632 696.5586324 6 -300 0.647961518 -194.3884555 7 -300 0.602754901 -180.8264703 8 -300 0.560702233 -168.21067 9 400 0.521583473 208.6333892 10 400 0.485193928 194.0775713 Discount Rate 0.075 Payback Period N.A. Discounted Payback N.A. Profitability Index -0.76 NPV -2630.32 IRR -5.27% Note: Payback and discounted payback cannot be calculated as neither the cash flow, nor the P.V. of cash flow are recovered during the life of project

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