I have two questions for this one.
What would a 20 year timeline on excel look like?
If the perpetuity formula is c/r. How come c/r(1+r)^10 was used instead?
What's the formula should I use in the "excel formula" cell when computing for NPV?
FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW . P & Cut B Copy Calibri 11 . A'A =29. Wrap Text General Normal Bad Good Neutral Calculation EX 2 AutoSum . As Paste Format Painter BIU . B. MA . BEE E Merge & Center . $ ~ % " $68 48 Conditional Format as |Check Cell Formatting Table Explanatory ... Input Linked Cell Note Insert Delete Format Fill Clear Sort & Find & Filter * Select Clipboard Font Alignment Number Styles Cells Editing P33 "I X V fx C D E G H L M N O P Q R S T U v w AA AB AC You own an instrument manufactoring company and are considering opening another one. The insturments that you manufactor are made from ancient Greek pipes. The factory itself will cost 115 million to open. If this money is spent immediately, the manufactoring company will generate $19 million for the next 10 years. After that, the ancient Greek pipes will run out and the site that you used to capture them must be cleaned and maintained at environmental standards. The cleaning and maintenance are expected to cost $1.5 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity? HEWN= BOO. V A MI A W N - (Hint: Consider the number of sign changes in the cash flows.) If the cost of capital is 7.6%, what does the NPV rule say? GIVEN NPER RATE 10 7.60% PV 19 FV pv of 1st cashflow pit EXCEL FORMULA -115 SOLUTION -254.312 1.5 0.076 Discount Rate 10.00% Period 0 Cash Flow Ct ($115.00) $ 19.000 $ 19.000 $ 19.000 $ 19.000 5 19.000 S 8 9 10 11 12 13 14 15 16 17 18 19 20 16 Discount Factor 1 0.909091 0.826446 0.751315 0.683013 0.620921323 19.000 $ 19.000 $ 19.000 $ 19.000 $ 19.000 $ (1.500) $ (1.500) $ (1.500) $ (1.500) 5 (1.500) $ (1.500) 5 (1.500) $ (1.500) 5 (1.500) s (1.500) 17 PV(Ct) ($115.00) $17.27 $15.70 $14.27 $12.98 $11.80 0.56447393 0.513158 0.466507 0.424098 0.385543 0.076 0.076 0.076 0.076 0.076 0.076 0.076 0.076 0.076 0.076 $10.73 $9.75 $8.86 $8.06 NPV $7.33 ($19.74) ($0.11) (50.11) (50.11) (50.11) (50.11) (50.11) (50.11) (50.11) (50.11 ) 18 ($19.016) 19 RR 9.606595% room for error 2.006595%Do Homework - Vladimir Vincent - Google Chrome 0 X mathxl.com/Student/PlayerHomework.aspx?homeworkld=572544647&questionld=2&flushed=true&cld=6135761¢erwin=yes MBA 808 Essentials of Financial Management Vladimir Vincent & | 10/02/20 8:06 PM Homework: Chapter 7 Homework Save Score: 0 of 1 pt 4 of 6 (6 complete) HW Score: 79.17%, 4.75 of 6 pts X P7-16 (similar to) Question Help You own a coal mining company and are considering opening a new mine. The mine itself will cost $115 million to open. If this money is spent immediately, the mine will generate $19 million for the next 10 years. After that, the coal will run out and the site must be cleaned and maintained at environmental standards. The cleaning and maintenance are expected to cost $1.5 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity? (Hint: Consider the number of sign changes in the cash flows.) If the cost of capital is 7.6%, what does the NPV rule say? What does the IRR rule say about whether you should accept this opportunity? (Select the best choice below.) O A Arrant the annartunity hamalice X OO Help Me Solve This X That's incorrect. X In this case, the plot of the NPV as a function of the discount rate is n-shaped. It * intersects the x-axis at 2.25% and 8.97%. uestion Help You own a coal mining company this money is spent immediately, the mine wi NPV of the Investment in the Coal Mine lust be cleaned and maintained at enviro 30.00- ear in matuitor What does the Inn . 20.00- 10.00- Click to select your answer and then NPV ($ millions) 0.00- 5 10 15 20 25 30 part remaining -10.00
