What is the cumulative cash flow at the end of Quarter

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Reference no: EM132197

Question 1:

The Whitton Co. has an opportunity to purchase a computer now for £18,000 that will yield annual net cash inflows of £10,000 for the next three years, after which its resale value could be zero. Whitton's cost of capital is 16% determine the net present value of the cash flows for the computer using spreadsheet formula.

Evaluate the IRR?

Formula for present value= +NPV (16%, C3:E3).

The cash flows are entered in columns C (Year 1) to E (Year 3).

Col A Col B Col C Col D Col E
Year 0 Year 1 Year 2 Year 3
Cash flows 10,000 10,000 10,000
Present value 22,459
Initial investment -18,000
NPV £ 4,459

To evaluate IRR using the spreadsheet function, a negative figure (the initial cash investment) have to be part of the range of values.
Formula for IRR = + IRR (B3:E3).

                     Year 0       Year 1             Year 2             Year 3
Cash flows - 18,000       10,000           10,000               10,000
IBR 31%

Question 2:

The selling price is expected to be £350 per ton for the first 3 months and £360 per ton thereafter. Variable costs per ton are shown as £100 in the first quarter, £120 in the second quarter, and £130 in the last two quarters; and salary and wages do not increase in the last two quarters. The rest of the assumptions are as listed on problem. What is the cumulative cash flow at the end of Quarter 4?

Reference no: EM132197

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