Calculate the Net Present Value (NPV) for the project businesscase. (Use Microsoft Excel to derive the NPV assuming the databelowsubmit
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Question:
- 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.
- Go to Editing and choose “?.”
- Select “More Functions”
- Select “NPV”
- Type in or select the rate
- Select year 1 to year 6 values. Hit enter
- Then add Year 0 (Notice that the investment is a negativenumber).
- Press Enter
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Posted Date: November 24, 2022 16:40:13