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 5. ? 5 FILE HOME INSERT Sign in Calibri - 11 1B Comparison of Capital Budgeting Methods - Excel PAGE LAYOUT FORMULAS DATA REVIEW VIEW - A A % A- Alignment Number Conditional Format as Cell Formatting Table Styles Styles fo Laurman, Inc. is considering the following project: Paste BIU- Cells Editing Clipboard Font Al X D E . 2,205,000 7 225,000 $ 8 B 1 Laurman, Inc. is considering the following project: 2 Required investment in equipment $ 3 Project life 4 Salvage value 5 6 The project would provide net operating income each year as follows: 7 Sales Variable expenses 9 Contribution margin 10 Fixed expenses: Salaries, rent and other fixed out-of pocket costs $ 12 Depreciation 13 Total fixed expenses Net operating income 15 16 Company discount rate 18% 17 2,750,000 1,600,000 1,150,000 $ 11 520,000 350.000 870.000 280,000 14 $ Sign in 11 M Paste Cells Editing D E 7 FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Calibri A A % BIU- - A Alignment Number Conditional Format as Cell Formatting Table Styles Clipboard Font Styles A1 f Laurman, Inc. is considering the following project: B C 18 1. Compute the annual net cash inflow from the project. 19 20 2. Complete the table to compute the net present value of the investment 21 22 Year(s) 23 Now 1-7 24 Initial investment 25 Annual cost savings 26 Salvage value of the new machine 27 Total cash flows 28 Discount factor 1.000 29 Present value of the cash flows 30 Net present value 31 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 S. Compute the project's simple rate of return years Sheet1 DEADY