I'm having trouble figuring out the last portion of my project which is NPV. We are supposed to use the PV factor of 11% to figure the last two sections. The sections in red are incorrect on my homework in Part 4, I do not know how to use the PV factor of 11% to finish my project.

ACCT505 Project 2 Sample Capital Budgeting Problem Solution This file can be used as the template for the actual project. Hampton Company Data: Cost of new equipment Expected life of equipment in years Disposal value in 5 years Life productionnumber of cans Annual production or purchase needs Initial training costs Number of workers needed Annual hours to be worked per employee Earnings per hour for employees Annual health benefits per employee Other annual benefits per employee% of wages Cost of raw materials per can Other variable production costs per can Costs to purchase cansper can Required rate of return Tax rate $1,000,000 5 $200,000 27,500,000 5,500,000 0 6 2,000 $15.00 $2,000 15% $0.30 $0.10 $0.50 11% 35% Make Purchase Cost to Produce Annual cost of direct material: Need of 1 million cans per year Annual cost of direct labor for new employees: Wages Health benefits Other benefits Total wages and benefits Other variable production costs Total annual production costs $1,650,000 180,000 12,000 27,000 219,000 550,000 $2,419,000 Annual cost to purchase cans $2,750,000 Part 1 Cash Flows Over the Life of the Project Item Annual cash savings Tax savings due to depreciation Before Tax Amount Tax Effect $331,000 $160,000 After Tax Amount 0.65 $215,150 0.35 $56,000 Total after-tax annual cash flow $271,150 Part 2 Payback Period $1000000 / $271150 = 3.69 years Part 3 Simple Rate of Return Accounting income as result of decreased costs Annual cash savings Less depreciation Before tax income Tax at 35% rate After tax income $331,000 160,000 171,000 59,850 $111,150 $111,150 / $1,000,000 = 11.12% Part 4 Net Present Value Item Cost of machine Cost of training Annual cash savings Tax savings due to depreciation Disposal value Net Present Value Before Tax Amount Year 0 0 1-5 1-5 5 Tax % -$1,000,000 0 $331,000 $160,000 $200,000 0.65 0.35 Part 5 Internal Rate of Return Excel function method to calculate IRR This function requires that you have only one cash flow per period (Period 0 through Period 5, f This means that no annuity figures can be used. The chart for our example can be revised as fo Item Cost of machine and training Year 1 inflow Year 2 inflow Year 3 inflow Year 4 inflow Year 5 inflow Year After Tax Amount 0 $(1,000,000) 1 $ 271,150 2 $ 271,150 3 $ 271,150 4 $ 271,150 5 $ 471,150 The IRR function will require the range of cash flows, beginning with the initial cash outflow for t and progressing through each year of the project. You also have to include an initial guess for th possible IRR. The formula is: =IRR(values,guess) IRR Function IRR(f84..f89,.30) 15.3% After Tax 11% PV Present Amount Factor Value -$1,000,000 1.000 -$1,000,000 0 1.000 0 215,150 0.901 311,205 56,000 3.791 42,459 200,000 0.593 24,840 -$621,496 riod (Period 0 through Period 5, for our example). our example can be revised as follows. g with the initial cash outflow for the investment ve to include an initial guess for the