Refer to the information in Exercise 26-12. Create an Excel spreadsheet to compute the internal rate of
Question:
Refer to the information in Exercise 26-12. Create an Excel spreadsheet to compute the internal rate of return for each of the projects.
Data From Exercise 26-12
Following is information on two alternative investments. Beachside Resort is considering building a new pool or spa. The company requires a 10% return from its investments. For each investment project, compute
(a) Net present value and
(b) Profitability index.
(c) If the company can only select one project, which should it choose on the basis of profitability index?
Pool Spa Initial investment.... $(160,000) $(105,000) Net cash flows: Year 1 40,000 32,000 Year 2 56,000 50,000 Year 3 80,295 66,000 Year 4 90,400 72,000 ..... Year 5 65,000 24,000
Step by Step Answer:
ANSWER a To calculate the net present value NPV and profitability index PI we need to first determin...View the full answer
Related Video
Internal rate of return is a method of calculating an investment’s rate of return. The term internal refers to the fact that the calculation excludes external factors, such as the risk-free rate, inflation, the cost of capital, or financial risk.
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