Can you help me excel spreadsheet this assignmentA project has the following est
ID: 3842281 • Letter: C
Question
Can you help me excel spreadsheet this assignmentA project has the following estimates for net cash flow. At the beginning of this four-year project, the project costs are expected to be $65,000 and no expenses will be incurred thereafter. Assuming an inflation rate of 3% and the required rate of return of 8%, compute the net present value of the project.
Year Pessimistic Cash Flow Estimate Most Likely Cash Flow Estimate Optimistic Cash Flow Estimate 1 $14,000 $20,000 $22,000 2 $19,000 $25,000 $30,000 3 $27,000 $30,000 $36,000 4 $32,000 $35,000 $39,000Explanation / Answer
P M O Year Pessimistic Cash Flow Estimate Most Likely Cash Flow Estimate Optimistic Cash Flow Estimate 1 $14,000 $20,000 $22,000 2 $19,000 $25,000 $30,000 3 $27,000 $30,000 $36,000 4 $32,000 $35,000 $39,000 a the formula for three point estimation technique is = p+4m+o/6 therefore P M O cash flows Year Pessimistic Cash Flow Estimate Most Likely Cash Flow Estimate Optimistic Cash Flow Estimate p+4m+o/6 1 $14,000 $20,000 $22,000 19333.333 2 $19,000 $25,000 $30,000 24833.333 3 $27,000 $30,000 $36,000 30500 4 $32,000 $35,000 $39,000 35166.667 Year CF 1 19333.33 2 24833.33 3 30500.00 4 35166.67 b using the nominal discount rate of 8% adjusting the cash flows for inflation we have pv at Year CF inflation adj b cf*b 8% CF*b*pv 1 19333.33 1.05^1 1.05 20300 0.925926 18796.3 2 24833.33 1.05^2 1.1025 27378.75 0.857339 23472.87 3 30500.00 1.05^3 1.157625 35307.563 0.793832 28028.28 4 35166.67 1.05^4 1.21550625 42745.303 0.73503 31419.07 pv of inflows 101716.5 less investment 65000 NPV 36716.52 Finding the real discount rate (1+nominal rate)/(1+ inflation rate) -1 1.08 -1 1.05 1.028571429 -1 Real disc 2.86% discounting the cash flows by the real discount rate pv of Year CF 2.86% 1 19333.33 0.972195217 18795.77419 2 24833.33 0.94516354 23471.56123 3 30500.00 0.918883472 28025.9459 4 35166.67 0.893334117 31415.5831 101708.8644 Less investment 65000 NPV 36708.86443 the answer remains same under both methods
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