Copy of Ray_Zutter_Spreadsheet_Chapter_5_Start - Excel Data Review View Help Tell me what you want to do = = = 1. E P2 Wrap Text Merge & Center - Accounting $ % AutoSave Of Hb els File Home Insert Page Layout Formulas X Cut Times New Roma - 14 - A L6 Copy - Paste * Format Painter B I U - A- Clipboard Font F45 : * fic A B C D E 1 Spreadsheet Exercise: Chapter 5 48.09 Sign in - 0 x Share Comments 3 X AutoSum" AYO Insert Delete Format Sort & Find & Clear Filter - Select Cells Editing 2 Conditional Format as Cell Formatting Table Styles Styles Alignment Number F G H I J K L M N O P LA At the end of 2019, Uma Corporation is considering a major long-term project in an effort to remain competitive in its industry. The production and sales departments have determined the potential annual cash flow savings that could accrue to the firm if it acts soon. Specifically, they estimate that a mixed stream of future cash flow savings will occur at the end of the years 2020 through 2025. The years 2026 through 2030 will see consecutive $90,0000 cash flow savings at the end of each year. The firm estimates that its discount rate over the first 6 years will be 7%. The expected discount rate over the years 2026 through 2030 will be 11%. The project managers will find the project acceptable if it results in present cash flow savings of at least $860,000. The following cash flow savings data are sunplied to the finance department for analysis End of year 2020 2021 2022 2023 2024 Cash flow savings $ 110,000 120,000 130,000 150,000 160,000 Chapter 5 + 0 -_ - + + 100% AutoSave Of Hb els Copy of Ray_Zutter_Spreadsheet_Chapter_5_Start - Excel Data Review View Help Tell me what you want to do = = = 1. E P2 Wrap Text Merge & Center - Accounting $ % Sign in - 0 x Share Comments 3 X AutoSum" AYO Insert Delete Format Sort & Find & Clear Filter - Select Cells Editing 48.09 2 Conditional Format as Cell Formatting Table Styles Styles Alignment Number File Home Insert Page Layout Formulas X Cut Times New Roma - 14 - A L6 Copy - Paste * Format Painter B I U - A- Clipboard Font F45 : * fic D E 2025 150,000 2026 90,000 2027 90.000 2028 90,000 2029 90.000 2030 90,000 F G H I J K L M N O P LA To Do Create spreadsheets similar to Table 5.2, and then answer the following questions. a. Determine the value (at the beginning of 2019) of the future cash flow savings expected to be generated by this b. Based solely on the one criterion set by management, should the firm undertake this specific project? Explain. c. What is the "interest rate risk," and how might it influence the recommendation made in part b? Explain. Solution a. Determine the value (at the beginning of 2019) of the future cash flow savings expected to be generated by this Discount rate for years 2020 - 2025 Chapter 5 + 0 -_ + AutoSave Of Hb els Copy of Ray_Zutter_Spreadsheet_Chapter_5_Start - Excel Data Review View Help Tell me what you want to do = = = 1. E P2 Wrap Text Merge & Center - Accounting $ % File Home Insert Page Layout Formulas X Cut Times New Roma - 14 - A L6 Copy - Paste * Format Painter B I U - A- Clipboard Font F45 : x fic A B C D E Discount rate for years 2026 - 2030 48.09 Sign in - 0 x Share Comments 3 X AutoSum" AYO Insert Delete Format Sort & Find & Clear Filter - Select Cells Editing 2 Conditional Format as Cell Formatting Table Styles Styles Alignment Number F G H I J K L M N O P A 11% Present Value Year (1) Year 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Cash Flow $ 110,000 120,000 130,000 150,000 160,000 150,000 90,000 90,000 90,000 90,000 90,000 S 1,270,000 10 11 b. Based solely on the one criterion set by management, should the firm undertake this specific project? Explain. 48 1 Chapter 5 @ -- + 100% AutoSave Of Hb els Copy of Ray_Zutter_Spreadsheet_Chapter_5_Start - Excel File Home Insert Page Layout Formulas Data Review View Help Tell me what you want to do X Cut Times New Roma - 14 - A = = = 1. Wrap Text Accounting 22 D L6 Copy - Paste B I U - A- * Format Painter E Merge & Center - $ % 48.09 Conditional Format as Cell Formatting Table Styles Clipboard Font Alignment Number Styles F45 - : fix A B C D E F G H I J b. Based solely on the one criterion set by management, should the firm undertake this specific project? Explain. Sign in - 0 x Share Comments E AutoSum" AY O Insert Delete Format Sort & Find & Clear Filter - Select Cells Editing K L M N O P A Based solely on the criteria set by management, the firm of the expected future savings total undertake this project as the present value than the $860,000 hurdle. which is c. What is the "interest rate risk," and how might it influence the recommendation made in part b? Explain. The concept of interest-rate risk states that changes in the interest rates may adversely affect the value of an investor's securities portfolio. While this is not a securities problem, the relationship between the change in rates and the subsequent change in the value of an asset hold true. If the the interest rates were to rise just 1 percent, the present Is the above statement true or false? Points 11 59 Requirements 1 In cell range F34:F44, by using cell references to the given data, calculate the present value of the cash flow for years 2020 thru 2030. (Hint: In cell F40, you will need to enter the nested PV function 60 =PV(SF$29,SD$39,0,-PV(SF$30,D40-SD$39,0,-E40)) and copy/paste it into cells F41:F44. | In cello F45 and 745 by using cell references to the given data calculate the total cash flow and total Chapter 5 + @ - +