The purpose of this assignment is to allow the students to become familiar with and practice the measurement of Net Present Value (NPV), payback, and Weighted Average Cost of Capital (WACC) using MicrosoftÂ® ExcelÂ®.
Resources: MicrosoftÂ® ExcelÂ®, Capital Budgeting Decision Models Template
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Calculate the following problems using MicrosoftÂ® ExcelÂ®:
- Calculate the NPV for each project and determine which project should be accepted.
|Project A||Project B||Project C||Project D|
|Inflow year 1||53,000.00||51,000.00||25,000.00||45,000.00|
|Inflow year 2||50,000.00||47,000.00||55,000.00||50,000.00|
|Inflow year 3||48,000.00||41,000.00||15,000.00||30,000.00|
|Inflow year 4||30,000.00||52,000.00||21,000.00||62,000.00|
|Inflow year 5||35,000.00||40,000.00||35,000.00||68,000.00|
- Your company is considering three independent projects. Given the following cash flow information, calculate the payback period for each. If your company requires a three-year payback before an investment can be accepted, which project(s) would be accepted?
|Project D||Project E||Project F|
|Inflow year 1||53,000.00||51,000.00||25,000.00|
|Inflow year 2||50,000.00||87,000.00||55,000.00|
|Inflow year 3||48,000.00||41,000.00||21,000.00|
|Inflow year 4||30,000.00||52,000.00||9,000.00|
|Inflow year 5||24,000.00||40,000.00||35,000.00|
- Using market value and book value (separately), find the adjusted WACC, using 30% tax rate.
|Component||Balance Sheet Value||Market Value||Cost of Capital|