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Comparison of Capital Budgeting Methods 1. Complete the capital budgeting methods. All answers must be entered as a formula. Click OK to begin. OK Comparison of Capital Budgeting Methods - Excel ? - 6 FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Calibri - 11 | A A Wrap Text General 47 M Sign In , AutoSum - Fill- Sort & Find & Clear Filter - Select Editing EU Insert Delete Format Paste BIU- -A Merge & Center - $,% 40.00 .000 Conditional Format as Cell Formatting Table Table Styles Styles Clipboard Font Alignment Number Cells Al X fx Laurman, Inc. is considering the following project: B E F G 1 Laurman, Inc. is considering the following project: 2 Required investment in equipment 3 Project life 4 Salvage value S 1,750.000 5 years 225.000 $ 2,750,000 1,600,000 1,150,000 $ S 6 The project would provide net operating income each year as follows: 7 Sales 8 Variable expenses 9 Contribution margin 10 Fixed expenses: 11 Salaries, rent and other fixed out-of pocket costs 12 Depreciation 13 Total fixed expenses 14 Net operating income 15 16 Cost of Capital 17 18 1. Compute the annual net cash inflow from the project. 520,000 350,000 870,000 280.000 $ 18% 19 17 20 2. Complete the following timeline to compute the net present value of the future cash flows for this project. Don't forget to include the salvage value in year 5. 21 Year 22 1 2 3 23 Net cash flow 0 4 S Sheet1 + 100% READY Attempt(s) Hint Comparison of Capital Budgeting Methods - Excel ? - 6 FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Calibri - 11 AA Be Wrap Text General 47 M E Insert Delete Format Sign In , AutoSum - Fill- Sort & Find & Clear Filter - Select Editing Paste BIU- - A Merge & Center - $,% 40.00 .000 Conditional Format as Cell Formatting Table Table Styles Styles Clipboard Font Alignment Number Cells Al Laurman, Inc. is considering the following project: G 22 4 S B D E F 18 1. Compute the annual net cash inflow from the project. 19 20 2. Complete the following timeline to compute the nel present value of the future cash flows for this project. Don't forget to include the salvage value in year 5. 21 Year 0 1 2 3 23 Net cash flow 24 Discount Factor = 1/((1+r)^n) 1.000 25 Present value of the cash flows 26 Net present value 27 28 3. Use Excel's NPV function to compute the present value of the cash flows from years 1-5. Do not include the original investment at time zero. 29 NPV of Cash Flows from Years 1-5 30 Deduct the cost of the investment 31 Net present value 32 Write an if/then statement to ACCEPT or REJECT the project based on NPV 33 34 Use Excel's IRR function to compute the project's internal rate of return 35 Write an if/then statement to ACCEPT or REJECT the project based on IRR 36 37 5. Compute the project's payback period. years 38 39 6. Compute the project's accounting rate of return. 40 Sheet1 + READY Attempt(s) 100% Hint