An expenditure of $100 000 was made on 30 June 2006 for additional plant in order...

 

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An expenditure of $100 000 was made on 30 June 2006 for additional plant in order to increase existing plant capacity. Constant further costs amounting to $20 000 at the end of each subsequent year are expected for ten years. Suppose that you have been asked to evaluate the present value (i.e., at 30/6/06) of this stream of cash flows assuming that a discount rate of 12% pa applies, and that you have entered the cash flows in an EXCEL spreadsheet with cells A2 to K2 where column A represents the year ending 30/6/06. If the present value were to be calculated using the NPV function, would ' =NPV(12%, A2:K2)' be the correct formula? If not, what formula should be used? (5 marks) An expenditure of $100 000 was made on 30 June 2006 for additional plant in order to increase existing plant capacity. Constant further costs amounting to $20 000 at the end of each subsequent year are expected for ten years. Suppose that you have been asked to evaluate the present value (i.e., at 30/6/06) of this stream of cash flows assuming that a discount rate of 12% pa applies, and that you have entered the cash flows in an EXCEL spreadsheet with cells A2 to K2 where column A represents the year ending 30/6/06. If the present value were to be calculated using the NPV function, would ' =NPV(12%, A2:K2)' be the correct formula? If not, what formula should be used? (5 marks)

Answer rating: 100% (QA)

The Excel spreed Sheet 2 3 4 5 6 7 00 L 9 10 11 14 15 16 11 18 19 A NPV year ... View the full answer