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 FORMULAS DATA REVIEWVEW Alignment Number Conditional Format as Cel Cells Editing Formatting" TableStyles Cipboard A1 v | | | X | | Laurman, inc. is considering the following project: the 2 Required investment in equipment 3 Project life 225,000 6 The project would provide net operating income each year as follows 7 Sales $ 2,750,000 8 Variable expenses 9 Contribution margin 10 Fixed expenses: 11 Salaries, rent and other fixed out-of pocket costs 12 Depreciation 13 Total fixed expenses 14 Net operating income 15 16 Company discount rate 520,000 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 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 1.000 82 Use Excets 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 8 4. Compute the project's payback period. 40 5. Compute the project's simple rate of return