Question: Please provide specific Excel functions =NPV(), =IRR(), =AVERAGE(), =YIELD() whenever applicable. Ferengi, Inc. is subject to an applicable corporate tax rate of 21 percent, and

Please provide specific Excel functions =NPV(), =IRR(), =AVERAGE(), =YIELD() whenever applicable.

Ferengi, Inc. is subject to an applicable corporate tax rate of 21 percent, and the weighted average cost of capital (WACC) of 12.5 percent. There is no specific time constraint on investment project payback requirements.

Q1: Ferengi is currently contemplating two capital investment plans. Plan A: the upgrade of an information system with an installed cost of $2,400,000. The upgrade system will be depreciated straight-line to zero over the projects five-year life, at the end of which the system will be worth $400,000 at the market. The system upgrade will not affect sales, but will save the firm $700,000 per year in pretax operating costs; and the upgrade will increase the working efficiency and reduce the net working capital expenditure by $300,000 at the beginning year.

What is the NPV of Plan A? What is the IRR of Plan A? Should Ferengi accept or reject Plan A?

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