Calculate the pv of the individual cash flows

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Reference no: EM131281753

Problem 1:

Capital Budgeting

Calculate the PV of the individual cash flows using the algebraic method. The value in the yellow cell will calculate on its own. Treat each valuein row 7 as if it was a single cash flow.

Enter the NPV function. Be sure to properly account for the initial cost!

Enter the IRR function.

Calculate the MIRR using the RATE function with nper=6, pv=-100, and fv=terminal value. Note pmt=0.

Problem 2:

Silkwood Power Company is considering two projects with the following predicted cash flows:

Answer these questions:

1. Which project(s) would be accepted if the company's cost of capital were 6%?
2. Which project(s) would be accepted if the company's cost of capital were 15%?
3. At what cost of capital would Silkwood value each project equally? (You can use an approximate answer here.)
4. At what cost of capital would the Hydro project become unacceptable? (Hint: Look at the IRR result.)
5. At what cost of capital would the Geo project become unacceptable? (Hint: Look at the IRR result.)

Problem 3:

Project A has an initial investment of $11,000, and generates positive cash flows of $4,000 each year for the next six years. Project B has an initial investment of $17,000, and generates positive cash flows of $4,500 each year for the next six years. Assume the discount rate is 13%.

Because Projects B and C are mutually exclusive, would you recommend that Project B or Project C be added to the capital budget for this year?

Attachment:- Problems.xlsx

Reference no: EM131281753

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11/18/2016 8:04:34 AM

Download the following Excel file: A8 – Ch 10.xlsxPreview the documentView in a new window On all the sheets, build formulas for all the cells shaded either pink or light blue. Answer ALL questions as presented in the text boxes. You should enter your answers in cells shaded green or in the text boxes themselves.

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