Week 8: Excel Simulation - Capital Budgeting Due Aug 28 by 1:59am Points 65 Submitting an external tool Available afterAug 21 at 2am You will complete this assignment in the McGraw-Hill Connect environment. In this simulation. you will need to enter the discount factor for both the annual cost savings and salvage value on line 29. We did not cover the standard formula for calculating the discount factors. 80. here are the guidelines for entering the factor: Annual Cash Savings: =(1!Company Discount Rate}*(1(1t(1+Company Discount Rate)\"Project Life)} Salvage Value =1I(1+Company Discount RateY'Project Life You will also need to use the =PV function to calculate the cash flows. The set up for this function should be: =PV(Company Discount Rate, Project Life, Annual Net Cash Inflow, Salvage Value) Please reach out to your professor if you have questions or need assistance. Week 8: Excel Simulation - Capital Budgeting i Saved 1. Determine the payback period for an investment. 2. Evaluate the acceptability of an investment project using the net present value method. 3. Evaluate the acceptability of an investment project using the internal rate of return method. 4. Compute the simple rate of return for an investment. 65 Comparison of Capital Budgeting Methods - Excel ? X points FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Sign In Calibri - 11 - A A % eBook Paste BIU- - A . Alignment Number Conditional Format as Cell Cells Editing Formatting * Table Styles * Clipboard Font Style A Ask A1 Laurman, Inc. is considering the following project: B C D E Print 1 Laurman, Inc. is considering the following project: Required investment in equipment 2,205,000 3 Project life References 4 Salvage value 225,000 The project would provide net operating income each year as follows: Sales S 2,750,000 Variable expenses 1,600,000 Contribution margin 1,150,000 10 Fixed expenses: 11 Salaries, rent and other fixed out-of pocket costs S 520,000 12 Depreciation 350,000 13 Total fixed expenses 870,000 14 Net operating income S 280,000 15 16 Company discount rate 18% 17 18 1. Compute the annual net cash inflow from the project.Calibri 11 A = % Paste BIUT A Alignment Number Conditional Format as Cell Cells Editing Formatting * Table Styles * Clipboard Font Styles A A1 X V fc Laurman, Inc. is considering the following project: 65 points A B C D E 20 2. Complete the table to compute the net present value of the investment. 21 22 Year(s) eBook 23 Now 1-7 Z 24 Initial investment 25 Annual cost savings Ask 26 Salvage value of the new machine 27 Total cash flows 28 Discount factor 1.000 Print 29 Present value of the cash flows 30 Net present value 31 References 32 Use Excel's PV function to compute the present value of the future cash flows 33 Deduct the cost of the investment 34 Net present value 35 36 3. Use Excel's RATE function to compute the project's internal rate of return 37 38 4. Compute the project's payback period. years 40 5. Compute the project's simple rate of return. 41