@ Excel File Edit View Insert Format Tools Data Window Help 3 @) o B @ Q & SunDec8 5:18PM r 00 @ Aucsae OB R & @ B PFproj(FL24)NYIT v Q_search (Cmd + Ctrl + U) & Learnic X @ NewT: X + v Home Insert Draw Page Layout Formulas Data Review View Automate C] Comments [CE R ge 3 Y, 0 Relaunch to update & fu L& 'Arial v\" 1 v' A A [EH conditional Formatting v | & Insert v /O . F [~ [ Format as Table v BX Delete v U LT [ DomainPlace All Bookmarks Paste B = Editing Add-ins | Analyze & fiZ cell styles v ] Format v Data 55| v A B C D E F G H 1 J L M o P 1 Learning Objectives X 2 3 |1.Understand how to use EXCEL Spreadsheet 4 | (a) Develop Proforma Income Statement Using Excel Spreadsheet . . b) G te Net Project Cashfl NPV dIRR phnect with Tutor works on Receive your s (b) Compute Net Proje = Li ows." ,.an. - n expert your question solution s |(c) Develop problem-solving and critical thinking skills 7 and make long-term investment decisions 8 s Capital Budgeting Decisions (Scenario 1) 10 14 12 1) Life Period of the Equipment = 4 years 8) Sales for first year (1) $ 200,000 13 |2) New equipment cost $ (200,000) 9) Sales increase per year 5% m to get helped ASAP 14 3) Equipment ship & install cost $ (35,000) 10) Operating cost (60% of Sales) $ (120,000) 15 |4) Related start up cost $ (5,000) (as a percent of sales in Year 1) -60% 16 5) Inventory increase $ 25,000 11) Depreciation (Straight Line)/YR $ (60,000) . 17 |6) Accounts Payable increase $ 5,000 12) Marginal Corporate Tax Rate (T) 21% Ask one question at a 18 |7) Equip. salvage value before tax $ 15,000 13) Cost of Capital (Discount Rate) 10% time 19 20 21 Year 1 2 3 4 22 Include all relevant 23 Operations: I/S information 24 Revenue $ 200,000 $ 210,000 $ 220,500 $ 231,525 25 Operating Cost $ (120,000) $ 126,000 $ 132,000 $ 138,915 26 Depreciation $ (60.000) $ 60000 $ 60.000 $ 60,000 . 27 EBIT $ 20,000 $ 24,000 $ 28200 $ 32,610 Use an image to ask a 28 Taxes $ 4200 $ 5040 $ 5922 6.848 question that is ;z Net Income $ 15800 $ 18,960 $ 22,287 $ 25,763 difficult to type 31 Add back Depreciation $ 60,000 $ 60,000 $ 60.000 $ 60.000 32 33 Total Operating Cash Flow $ 75800 $ 78960 $ 82,287 $ 85,763 34 35 ESTIMATING Initial Outlay (Cash Flow, CFo, T= 0 36 27, f~EN rE1 ~rE2 re2 f~EA Scenario 1 Scenario 2 o Ready f",Accessibility: Good to go ~ Excel File Edit View Insert Format Tools Data Window Help [III Q 2 Sun Dec 8 5:18 PM .. . AutoSave O W A G 7 C ... X= PFproj (FL24)NYIT ~ Q Search (Cmd + Ctrl + U) C Learnin x New Ta x + Home Insert Draw Page Layout Formulas Data Review View Automate Comments Share M Relaunch to update : Arial V 14 V A " A Number Conditional Formatting v Insert v Format as Table v RX Delete v DomainPlace Paste >> | All Bookmarks BIU | ~ |DAY Add-ins Cell Styles Format Editing Analyze Data F55 XVfx B C D E F G H K M N 37 CFO CF1 CF2 CF3 CF4 X 38 Year 0 1 2 3 4 39 Investments: 40 1) Equipment cost $ (200,000) 41 2) Shipping and Install cost (35,000) nect with Tutor works on Receive your 42 3) Start up expenses (5,000) expert your question solution 43 Total Basis Cost (1+2+3) $ (240,000) 44 4) Net Working Capital 45 Increase in CA - Increase in CL $ (20,000) 46 Total Initial Outlay $ (260,000) 47 48 49 Terminal: 50 1) Change in net WC $ $ $ 20,000 Pro tips to get helped ASAP 51 2) Salvage value (after tax) Salvage Value Before Tax (1-T) CAKEA tA 11,850 52 Total $ 75,800 $ 78,960 $ 82,278 $ 117,612 53 Ask one question at a Project Net Cash Flows $ (260,000) $ 151,600 $ 157,920 $ 164,565 $ 203,375 time 6 NPV = $16,35 IRR = Payback= 57 58 Q#1 Include all relevant 59 (a) Would you accept the project based on NPV and IRR? information 60 61 (b) Would you accept the project based on Payback rule if the project cut-off is 3 years? 62 63 Q#2 How would you explain to your CEO what NPV means? Use an image to ask a 64 question that is 65 Q#3 What are the advantages and disadvantages of using the Payback method only? difficult to type 66 7 Q#4 What are the advantages and disadvantages of using NPV versus IRR? 68 9 Q#5 Explain the difference between independent projects and mutually exclusive projects. 70 When you are confronted with Mutually Exclusive Projects and have conflicts 71 with NPV and IRR results, which criterion would you use (NPV or IRR) and why? 72 Scenario 1 Scenario 2 + Ready Accessibility: Good to go + 100% 8 O P