AutoSave OFF CH Home Insert Draw Page Layout fx ? |A| Insert AutoSum Recently Financial Logical Text Date & Function Used B27 11 12 .. V 21 22 23 = A 13 Cost of equipment 14 Shipping & handling 15 Start-up expenses 16 Total Investment 17 Ready 18 Labor savings (after tax) 19 Salvage value (after tax) 20 Total Savings V 24 WACC 25 26 Calculate Problem V 9% Sheet2 Open recovered workbooks? Your recent changes were saved. Do you want to continue working where you left off? x fx B 1 2 3 4 Legend Company is trying to reduce its cost structure in an effort to boost profits. 5 It is looking at automating parts of its production process. It is evaluating two 6 different pieces of equipment to accomplish the cost reductions. 7 8 9 10 ... Formulas Data Review e Today Sheet3 $ (100,000) $ (5,000) $ (15,000) $ (120,000) C D E NPV / IRR Homework Assignment Lookup & Math & Time Reference Trig $ $ + View Year 1 15,000 $ V Name More Functions. Manager Equip A Cash Flows Year 2 40,000 $ 15,000 $ 40,000 $ F NPV IRR HW Tell me Year 3 Define Name Use in Formula Create from Selection G Year 4 50,000 $ $ 50,000 $ 55,000 50,000 5,000 v H Trace Precedents Trace Dependents Vfx Ax x 163 Show Error Watch Remove Arrows Formulas Checking Window I J K B L " V Calculation Options Share M Q OD Comments Calculate Now Calculate Sheet Yes + N No 150% AutoSave OFF CH Home Insert Draw Page Layout fx ? |A| Insert AutoSum Recently Financial Logical Text Date & Function Used H28 .. V = A 23 24 WACC 25 26 Calculate: 27 NPV 28 IRR 29 Payback 30 31 32 33 34 35 Cost of equipment 36 Shipping & handling 37 Start-up expenses 38 Total Investment Ready 44 45 WACC 46 47 Calculate: 48 NPV V 39 40 Labor savings (after tax) 41 Salvage value (after tax) 42 Total Savings 43 Problem B 9% Open recovered workbooks? Your recent changes were saved. Do you want to continue working where you left off? x fx 9% V Sheet2 C ... Formulas Data Review e Today Sheet3 $ (120,000) $ (5,000) $ (5,000) $ (130,000) Lookup & Math & Time Reference Trig + D Year 1 E View 30,000 $ Equip B Cash Flows Year 2 $ $ 30,000 $ 40,000 $ V Name More Functions. Manager 40,000 $ NPV IRR HW Tell me F Year 3 Define Name Use in Formula Create from Selection 50,000 $ $ 50,000 $ G Year 4 50,000 5,000 55,000 H Trace Precedents Trace Dependents 163 Show Error Watch Remove Arrows Formulas Checking Window Vfx Ax x I J K B L " V Calculation Options Share M Q OD Comments Calculate Now Calculate Sheet Yes + N No 150% AutoSave OFF CH Home Insert Draw Page Layout fx .. ? V |A| Insert AutoSum Recently Financial Logical Text Date & Function Used H28 A JU 30 Total invesutient 39 40 Labor savings (after tax) 41 Salvage value (after tax) 42 Total Savings 43 44 45 WACC 46 47 Calculate: 48 NPV 49 IRR 50 Payback 51 52 Ready B Problem 9% V ... Sheet2 Formulas Data Review e Open recovered workbooks? Your recent changes were saved. Do you want to continue working where you left off? x fx C (150,000) Sheet3 $ 53 1) Explain what NPV means to your CEO. 54 2) Should you invest in this project? Why? 55 3) What are the two major drawbacks to using IRR? 56 4) Explain why Payback sucks as a value metric. 57 58 59 60 61 62 63 Lookup & Math & Time Reference Trig D + 30,000 $ $ 30,000 $ E View V NPV IRR HW Tell me More Name Functions. Manager 40,000 $ F 50,000 $ $ 40,000 $ 50,000 $ Define Name Use in Formula Create from Selection G 50,000 5,000 55,000 H Trace Precedents Trace Dependents 163 Show Error Watch Remove Arrows Formulas Checking Window Vfx Ax x I J K L " V Calculation Options Share M Q OD Comments Calculate Now Calculate Sheet Yes + N No 150%