Below is an example of a simple capital project analysis using Excel. Place your cursor on a
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Below is an example of a simple capital project analysis using Excel. Place your cursor on a cell to see the formulas and functions I used in Excel.
13% | Required rate of return | ||||
Year | Project A | Cumulative | Project B | Cumulative | |
0 | $ (300,000) | $ (40,000) | |||
1 | $ 100,000 | $ (200,000) | $ 20,300 | $ (19,700) | |
2 | $ 47,000 | $ (153,000) | $ 15,200 | $ (4,500) | |
3 | $ 62,000 | $ (91,000) | $ 14,100 | ||
4 | $ 300,000 | $ 11,200 | |||
0.30 | 0.32 | ||||
Payback | 3.30 | 2.32 | |||
PV | $352,268 | $46,510 | |||
NPV | $52,268 | $6,510 | |||
IRR | 19.51% | 21.51% | |||
PI | 1.17 | 1.16 | |||
SUMMARY | PROJECT A | PROJECT B | |||
Payback | 3.30 years | 2.32 years | |||
NPV | $52,268 | $6,510 | |||
IRR | 19.51% | 21.51% | |||
PI | 1.17 | 1.16 |
Notice the summary of the results at the bottom?
1. Based on this, which project would you choose, and why?
2. Do any of the calculations give you conflicting results?
Related Book For
Fundamentals of Financial Accounting
ISBN: 978-0078025914
5th edition
Authors: Fred Phillips, Robert Libby, Patricia Libby
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