Please show excel formulas!!!! Assignment 5-2, Question 1

a.

Net Present Value (NPV):

NPVx =

-$10,000

+

$

+

$

+

$

+

$

=

$

NPVy =

-$10,000

+

$

+

$

+

$

+

$

=

$

Internal Rate of Return (IRR):

To solve for each project's IRR, find the discount rates that equate each NPV to zero:

IRRx

=

18%

IRRy

=

%

Modified Internal Rate of Return (MIRR):

To obtain each project's MIRR, begin by finding each project's terminal value (TV) of cash inflows:

TVx

=

$6,500 (1.12)^3

+

$

+

$

+

$1,000

=

$

TVy

=

$

+

$

+

$

+

$3,500

=

$

Now, each project's MIRR is the discount rate that equates the PV of the TV to each project's cost, $10,000:

MIRRx

=

%

MIRRy

=

%

Profitability Index (PI):

To obtain each project's PI, divide its present value of future cash flows by its initial cost. The PV of future cash flows can be found from the NPV calculated earlier:

PVx

=

NPVx

+

Cost of X

=

$

+

$10,000

=

$

PVy

=

NPVy

+

Cost of Y

=

$

+

$

=

$

PIx

=

PVx

Cost of X

=

$

$

=

PIy

=

PVy

Cost of Y

=

$

$

=