O lu. 1:1 FINA 306 MINICASE EXCEL Spring... A Administrative matters 1. Assignment will be done by using Microsoft Excel and Word. 2. The deadline for the assignment is 13th May, 2020, Wednesday. Please note that this assignment makes up 15% of your grade. 3. You must send the answered Excel and Worc files via e-mail to cyclamiram.ex.tr 4. Please be careful with the NPV function of Excel as it calculates the NPV by assuring that the cash flows start in year 1 (NPV of CF in year 1....CF in year t) + Initial Investment (CF in year 0)]. Please include the spreadsheet printouts you will be building for answering the questions. 1) Using Excel and Ward: The following are the cash flaws of two projects: Project Year Project A -$200 $200 100 80 100 100 80 a. What is the payback period of each project? b. Is the project with the shortest payback period also the one with the highest NPV? Assume that the hurdle rate is 11%. Explain why or why not. 2. Using Excel and Word: A new computer system will require an initial outlay of $20,000, but it will increase the firm's cash flows by 54,000 a year for each of the next 8 years a. Calculate the NPV and decide if the system is worth installing if the required rate of return is 9% What if it is 14%? b. How high can the discount rate be before you would reject the project? 3. Using Excel and Word: Strip Mining Inc, can develop a new mine at an initial cost of $5 million. The mine will provide a cash flow of $30 million in 1 year. The land then must be reclaimed at a cost of $20 million in the second year a. What are the IRRs of this project? b. Should the firm develop the mine if the discount rate is 10%? 20%? 350%? 400%? Please continue to the next page Dr. Cahit Adaoglu Depl. of Banking and Finance 4. Using Excel and Word: Consider projects A and B: Project Cash Flows (Dollars) C: -30,000 21,000 -50,000 33,000 C: NPV @ 10% 21,000 $6,446 33,000 7,273 a. Calculate is for Aand b. Which project does the IRR rule sueeest is best? C. Which project is really best? THE IND