• Calculate the Net Present Value (NPV) for the project businesscase. (Use Microsoft Excel to derive the NPV assuming the databelow—submit an Excel spreadsheet as an appendix:
  • Purchase price of $400,000.
  • One-time project costs total of $100,000 spent in Year 0.
  • Net benefits after taxes of $150,000 per year for fiveyears.
  • Salvage value for Year 6 and beyond of $400,000.)

Step 1

Set up a Cash Flow Table. See Table 1. Notice that adiscount rate is included.

Year	Amount
0	($550,000)
1	$120,000
2	$120,000
3	$120,000
4	$120,000
5	$120,000
6	$600,000
Rate	0.05

Table 1. Cash Flow with Interest Rate

Step 2

Determine NPV.

1. Go to Editing and choose “?.”
2. Select “More Functions”
3. Select “NPV”
4. Type in or select the rate
5. Select year 1 to year 6 values. Hit enter
6. Then add Year 0 (Notice that the investment is a negativenumber).
7. Press Enter

Answer rating: 100% (QA)

A B 1 year Amount Excel formula 2 0 500 000 400000 100000 3 1 150 000 4 2 1 View the full answer