Complete questions 1 thru 15 using excel- below. Answer each question. For question 4, the initial investment amount is stated on page 593 (equipment purchase). This amount should be expressed as a negative (in parentheses) as this is money going out (initial outlay). See pages 575, 576, and a good example on page 590. You don't need salvage value to work this specific question. You'll need salvage value in subsequent questions per different scenarios expressed in those questions. Please send me an email if you need more clarity or have any other questions. Please note that you can retrieve the discount factor tables from page 614 (Exhibit 12B-2). Again, using question 4 foundational15 as an example, for a5-yearproject with a discount rate at 14%, look where period 5 intersects at 14% and you'll find 3.433. The tables have made it more precise and accurate than any manual calculations.

Create in Excel

Foundation 15 Assignment

Chapter 12

1

2

The annual net cash inflows are computed as follows:

Net operating income.........................................................

$xxxxx

Add: Noncash deduction for depreciation...............................

xxxxx

Annual net cash inflow............................................................

$xxxxx

3

The present value of the annual net cash inflows is computed as follows

14%

Present Value

Item

year(s)

Cash Flow

Factor

of Cash Flows

Annual net cash inflows...........

5-Jan

$xxxxxxx

3.433

$xxxxxx

4

The project's net present value is computed as follows:

Years

Now

1 to 5

Purchase of equipment...........................

$(xxxxxxx)

Sales.......................................................

$xxxxxxx

Variable expenses...................................

(xxxxxxx)

Out-of-pocket costs.................................

(xxxxxxx)

Total cash flows (a)..................................

$xxxxxxx

Discount factor (b)...................................

1

3.433

Present value (a) x (b)..............................

$(xxxxxx)

$xxxxxxx

Net present value....................................

$xxxxxxx

(this NPV will be the difference between present value for years "1 to 5 and "now")

5

The profitability index for the project is:

Present value of

Investment

Profitability

cash inflows

required

index

Item

(a)

(b)

(a)(b)

Project

$xxxxxxx

$xxxxxxxx

xxxxxx*

*You may round to 2 decimal places.

6

The project's internal rate of return is:

Factor of the internal rate of return= Investment required/Annual cash inflows= $xxxxxxx/$xxxxxxx= xxxxxxx

7

Project's payback period:

Good example on page 571 exhibit 12-2

Cash

Unrecovered

Year

Investment

inflow

investment

8

The simple rate of return is computed as follows:

Simple rate of return = Annual incremental net operating income/ initial investment= $xxxxxx/$xxxxxxx= xxxxxx%

9

Answer to the best of your understanding making sense of what you've learned.

10

Answer to the best of your understanding.

11

Answer to the best of your understanding.

12

Answer to the best of your understanding.

13

Years

Now

1 to 5

Purchase of equipment

$(xxxxxxx)

Sales

$xxxxxxx

Variable expenses ............................

(xxxxxxx)

(Hint* The new variable expense would be given sales multiply by 45%)

Out-of-pocket costs..........................

(xxxxxx)

Total cash flows (a) ..........................

$(xxxxxxx)

$xxxxxxx

Discount factor (b) ...........................

1

3.433

Present value (a)(b) ........................

$(xxxxxxx)

$xxxxxxx

Net present value.............................

$(xxxxxxx)

(this NPV will be the difference between present value for years "1 to 5 and "now")

14

The payback period will be:

See good example on page 571 exhibit 12-2

At what year is the investment in the project fully recovered? Okay to round off/ approximate your answer to the nearest whole year.

15

The simple rate of return= Annual incremental net operating income/ Initial investment= $xxxxxx/$xxxxxxx= xxxx%