Summer Tyme, Inc. is considering a new three-year expansion project that require

Question

Summer Tyme, Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $3.9 million, after which time it will be worthless. The project is estimated to generate $2,650,000 annual sales, with costs of $840,000. The tax rate is 35%. Show How to find the OCF Using Microsoft Excel Functions NPV and IRR only.

I am not looking for the OCF, I am looking for how to use NPV and IRR in Excel to answer the question. Please do not submit an answer unless it is using NPV or IRR in Excel.

Explanation / Answer

To calculate NPV using excel :

i) Put rate in first cell.

ii) Now put the operating cash flows sequentially into adjacent cells.

iii) Use =NPV(A1,A2,A3,A4,A5) to calculate the NPV.

To calculate IRR using excel :

i) First Put the initial investment in the first cell like -3,900,000 in A1.

ii) Now put the operating cash flows sequentially into adjacent cells.

iii) Use =IRR(A1,A2,A3,A4) or = IRR(A1:A4) to calculate the IRR.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.