Using Excel to Determine the Net Present Value

Student Work Area

PROBLEM

Required: Provide input into cells shaded in yellow in this template. Use the NPV function with cell referencing to the Problem area in the input cell. Use a math formula in the field in which the cash flow for the salvage value is expected to occur, and separately, to account for the initial cash flow in the formula after the function has been inputted.

Thunder Corporation, an amusement park, is considering a capital investment in a new exhibit. Amusement parks need to rotate exhibits to keep people interested. Additional information concerning the potential investment follows.

Original cost of investment

$ 136,000

Estimated sales value at end of 5 years

60,000

Calculate the net present value of this project to the company using Excel's NPV function.

Expected increase in annual cash flows

25,000

Estimated useful life in years

5

years

Borrowing rate

8.0%

Net present value

Cost of capital

10.0%

Functlon: NPV; Formular Add, Subtract; Cell Referencing Using Excel to Detormine the Not Present Value Student Work Area PROBLEM Thunder Corporation, an amusement perk, s considoring a capitil irvestment in a new exhlbt. Amusement parks need to rotate exhbits to keep poople interested. Addeional inlormation concerning the potertial investment follows. Required: Provido input into cols shaded in yelow in this template. Use the NPV function wath cet relerencing to the Problem area in the input coll. Use a math formula in the field h which the cash flow for the saivage value is expectod to occur, and seperately, to account for the intial cash fow in the formula after the function has been houtted. OriginarcostofinvestmentEstrmatedsalesvalueatendof5yearsExpoctedincroasehannualcashflowsEstmatedusetultheinyearsBorrowhyrateCostolcoptal$136,00060,00025,0005years80%10.0% Calculate the net present vatue of this project to the company using Excer's NPY function