Excel Activity: Capital Budgeting Tools

Start with the partial model in the file Ch12 P25 Build a Model.xlsx. Gardial Fisheries is considering two mutually exclusive investments. The projects' expected net cash flows are as follows:

	Expected Net Cash Flows
Year	Project A	Project B
0	-$435		-$635
1	-450		185
2	-300		185
3	-150		185
4	900		185
5	900		185
6	912		185
7	-300		185

The data has been collected in the Microsoft Excel file below. Download the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations.

Download spreadsheet Ch12 P25 Build a Model-6d7327.xlsx

If each project's cost of capital is 9%, which project should be selected? Round your answers to the nearest cent.

NPV (Project A): $ fill in the blank 2

NPV (Project B): $ fill in the blank 3

Project AProject B

1. should be selected.

If the cost of capital is 14%, what project is the proper choice? Round your answers to the nearest cent.

NPV (Project A): $ fill in the blank 5

NPV (Project B): $ fill in the blank 6

Project AProject B

1. should be selected.

Construct NPV profiles for Projects A and B. Choose the correct graph.

A.		B.
C.		D.

What is each project's IRR? (Hint: Using the Excel IRR function, set the guess parameter to be 10%.) Round your answers to two decimal places.

IRR (Project A): fill in the blank 9 %

IRR (Project B): fill in the blank 10 %

What is the crossover rate, and what is its significance? (Hint: Using the Excel IRR function, set the guess parameter to be 10%.) Round your answer for the crossover rate to two decimal places and for the NPV to the nearest cent.

The crossover rate is fill in the blank 11 %. The crossover rate represents the cost of capital at which the two projects have the NPV of $ fill in the blank 12.

What is each project's MIRR at a cost of capital of 9%? At r = 14%? Round your answers to two decimal places.

	Project A	Project B
MIRR at r = 9%	fill in the blank 13 %	fill in the blank 14 %
MIRR at r = 14%	fill in the blank 15 %	fill in the blank 16 %

What is the regular payback period for these two projects? Round your answers to two decimal places.

Regular payback period (Project A): fill in the blank 17 years

Regular payback period (Project B): fill in the blank 18 years

At a cost of capital of 9%, what is the discounted payback period for these two projects? Round your answers to two decimal places.

Discounted payback period (Project A): fill in the blank 19 years

Discounted payback period (Project B): fill in the blank 20 years

What is the profitability index for each project if the cost of capital is 9%? Round your answers to three decimal places.

Profitability index (Project A): fill in the blank 21

Profitability index (Project B): fill in the blank 22

Homework #2 of 2: Capital Budgeting Tools IPV ( FIUJELL A). P NPV (Project B): $ should be selected. If the cost of capital is 14%, what project is the proper choice? Round your answers to the nearest cent. NPV (Project A): $ NPV (Project B): $ should be selected. b. Construct NPV profiles for Projects A and B. Choose the correct graph. A. B NPV Profiles NPV Profiles $1,200- $1,200- $1,000 $1,000 $800 $800 $600 $600 NPV NPV $400 $400 $200 $200+ SO SO 0% 5% 10% 15% 25% 30% 0% 15% 20% 25% $200 -$200 Cost of Capital Cost of Capital -$400 - - Project A Project B $400- - Project A - Project B Back Autosaved at 8:09 PM NextExcel Homework #2 of 2: Capital Budgeting Tools IRR (Project B): d. What is the crossover rate, and what is its significance? (Hint: Using the Excel IRR function, set the guess parameter to be 10%.) Round your answer for the crossover rate to two decimal places and for the NPV to the nearest cent. The crossover rate is %. The crossover rate represents the cost of capital at which the two projects have the NPV of $ e. What is each project's MIRR at a cost of capital of 9%? At r = 14%? Round your answers to two decimal places. Project A Project B MIRR at r = 9% % MIRR at r = 14% % f. What is the regular payback period for these two projects? Round your answers to two decimal places. Regular payback period (Project A): years Regular payback period (Project B): years J. At a cost of capital of 9%, what is the discounted payback period for these two projects? Round your answers to two decimal places. Discounted payback period (Project A) : years Discounted payback period (Project B): years h. What is the profitability index for each project if the cost of capital is 9%? Round your answers to three decimal places. Profitability index (Project A): Profitability index (Project B) : Check My Work Reset Problem Back Autosaved at 8:09 PM NextExcel Homework #2 of 2: Capital Budgeting Tools Excel Activity: Capital Budgeting Tools Start with the partial model in the file Ch12 P25 Build a Model.xisx. Gardial Fisheries is considering two mutually exclusive investments. The projects expected net cash flows are as follows: Expected Net Cash Flows Year Project A Project B 0 $435 -$635 -450 185 -300 185 AWNI -150 185 900 185 900 185 912 185 300 185 The data has been collected in the Microsoft Excel file below. Download the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations. X Download spreadsheet Ch12 P25 Build a Model-6d7327.xisx a. If each project's cost of capital is 9%, which project should be selected? Round your answers to the nearest cent. NPV (Project A): $ NPV (Project B): $ should be selected. If the cost of capital is 14%, what project is the proper choice? Round your answers to the nearest cent. Back Autosaved at 8:09 PM Nextework #2 of 2: Capital Budgeting Tools C. D. NPV Profiles NPV Profiles $1,200- $1,200- $1,000 $1,000 $800 $800 $600- $600- NPV NPV $400- $400 $200 $200 SO SO 0% 5% 10% 15% 130% 0% 5% 10% 15% 20% 25% -$200 $200 Cost of Capital Cost of Capital -$400 -Project A - Project B $400 Project A - Project B The correct graph is c. What is each project's IRR? (Hint: Using the Excel IRR function, set the guess parameter to be 10%.) Round your answers to two decimal places. IRR (Project A) : % IRR (Project B): d. What is the crossover rate, and what is its significance? (Hint: Using the Excel IRR function, set the guess parameter to be 10%.) Round your answer for the crossover rate to two decimal places and for the NPV to the nearest cent. The crossover rate is %. The crossover rate represents the cost of capital at which the two projects have the NPV of $ Back Autosaved at 8:09 PM Next