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. Comparison of Capital Budgeting Methods - Excel FILE HOME INSERT PAGE LAYOUT Tables Illustrations Apps for Recommended Office Charts Apps Charts fx D28 FORMULAS B 1 Laurman, Inc. is considering the following project: 2 Required investment in equipment 3 Project life 4 Salvage value 5 DATA REVIEW VIEW 8 ~ D Sign In PivotChart Power Sparklines Filters View Links Text Symbols Reports $ es C 6 The project would provide net operating income each year as follows: 7 Sales 8 Variable expenses 9 Contribution margin 10 Fixed expenses: 11 Salaries, rent and other fixed out-of pocket costs $ 10 12 Depreciation 13 Total fixed expenses 14 Net operating income 15 2,205,000 7 225,000 D E $ 2,750,000 1,600,000 $ 1,150,000 520,000 350,000 870,000 280.000 16 Company discount rate 17 18 1. Compute the annual net cash inflow from the project. 19 18% 20 2. Complete the table to compute the net present value of the investment. 21 22 22 23 READY Sheet1 Attempt(s) 9/10 Now Year(s) 1-7 + + 100% Hint Show Me 23 24 Initial investment 25 Annual cost savings 26 Salvage value of the new machine 27 Total cash flows 28 Discount factor 29 Present value of the cash flows 30 Net present value 31 Now 1-7 1.000 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. 39 40 5. Compute the project's simple rate of return. 41 READY Attempt(s) 9/10 Sheet1 N years 100% Hint Show Me