Comparison of Capital Budgeting Methods

Comparison of Capital Budgeting Methods 1. Determine the payback perod 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 intemal rate of return method nvestment All answers must be entered as a formula. Click OK to begin. References Comparison of Capital Budgeting Methods 1. Determine the payback period for an investment 2. Evaluate the acceptability of an investment project using the net present vakue 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 HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Sign In Calibri Blu- B-Algnment Nam ber Conditional Form at as Cells Editng Formatting Table styles . ClipboardG A1 : x | Laurman, Inc. is considering the following project: Lurman Inc- s considerting the follow 2 Required investment in equipment 3 Project life 4 Salvage value e project 2,205,000 225,000 The project would provide net operating income each year as follows: 7 Sale 2,750,000 Variable expenses $1,150,000 9 Contribution margin 0 FIxed expenses: 11 Salaries, rent and other fixed out-of pocket costs 520,000 390099 13 Total fixed expenses Net operating income 14 15 6 Company discount rate 17 18 1. Compute the annual net cash inflow from the project. 19 202. Complete the table to compute the net present value of the investment. 21 Years) 23 .. Sheetl Attempt s) References Comparison of Capital Budgeting Methods 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 intemal rate of return method. the Comparison of Capital Budgeting Methods-Exce Sign In HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIE e Calibni Formatting Table Styles lipboard A1 X-/ Laurman, Inc. is considering the following project Year s 24 Initial inwestment 25 Annual cost savings 26 Salvage value of the new machline 27 Total cash flows 28 Discount factor 29 present value of the cash flows 1.000 0 Net present value 31 2 Use Excel's PV function to compute the present value of the future cash flows 33 Deduct the cost of the investment 4 Net present value 35 6 3. Use Excers RATE function to compute the project's internal rate of return 37 4. Compute the project's payback period 39 0 5. Compute the project's simple rate of return. 43 Sheet1 Attempt(s) References