Question: Answer in Excel: 4 |_ Question 3: Capital budgeting (5 marks) A company is considering a new project. The project costs $295,000 and has a

Answer in Excel:

4 |_ Question 3: Capital budgeting (5 marks) A company is considering a new project. The project costs $295,000 and has a 5-year life. During the Year 1, it will produce a cash flow of $73,000, which is expected to grow at 8% per annum from Year 2 to 5. The appropriate discount rate is 15% per annum. Please answer the following questions: (a) Work out the Year 2 to 5 cash flows from this investment (with no added terminal value) {1 mark). (h) Use a financial function to work out the Net Present Value (NPV) and the Internal Rate of Return (IRR) of the project (1 mark). (c) Use a logical function to indicate whether the NW and IRR suggest that this project should proceed (1 mark). (d) Add a Data Table that displays how the net present value changes as the discount rate and growth rate vary between 12%-17% and 6%11% respectively, as shown in the table below (2 marks - no marks for entering individual formulae into the table). Possible variations in annual growth rates in cash flows 6.00% 7.00% 8.00% 9.00% 10.00% 113.0% 12.00% P 'bl 13.00% losf' 6. 14.00% variations In discount rate 15-00% 15.00% 17.00%

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