Magnificent Modems, Inc. (MMI), has several capital investment opportunities. The term, expected annual cash inflows, and the

Question:

Magnificent Modems, Inc. (MMI), has several capital investment opportunities. The term, expected annual cash inflows, and the cost of each opportunity are outlined in the following table. MMI has established a desired rate of return of 16 percent for these investment opportunities.

Opportunity A Investment term Expected cash inflow Cost of investment 4 years 5 years 5 years $ 4,800 3 years $ 6,000 $1

Required
a. Compute the net present value of each investment opportunity manually using the present value tables. Record your answers in the following table. The results for Investment Opportunity A have been recorded in the table as an example.

Magnificent Modems, Inc. (MMI), has several capital investment o

b. Use Excel spreadsheet software or a financial calculator to determine the net present value and the internal rate of return for each investment opportunity. Record the results in the following table. The results for investment Opportunity A have been recorded in the following table as an example. Note that the manual computation yields the same net present value amounts as the financial function routines of Excel or a financial calculator.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment...