Question
OK I know this seems like more than one question but I need the answers to connect so I had to post as one. Can
OK I know this seems like more than one question but I need the answers to connect so I had to post as one. Can an expert PLEASE help me with this as soon as possible??
Instructions: A company is reviewing four projects they could choose to undertake. You have been given the cost of capital and the estimated cash flows for each project. Your job is to determine the net present value, internal rate of return, modified internal rate of return, and payback period for each of the projects.
1. Start by calculating the discounted cash flows for each project. These can be used to (a) calculate the net present value (by summing them up) and (b) calculate the discounted payback period. Create a formula in cell H8 that will discount the cash flow in cell C8. The way this should be done is: DCFt,i = CFt,i / (1+r)t where t denotes the year and i denotes the project. For example, to calculate the discounted cash flow for Project 1 in Year 0, you would take the -100000/(1+.085)0 = -100,000 or if you discount the cashflow for Project 3 in Year 3, it would be 100000/(1+.085)3 = 78,290.81. The key here is to write a formula in cell H8 that relies on cells C4, B8, and C8 and then use absolute referencing (those dollar signs) to make that formula copyable to all the other cells in the square.
2. Next, you will need to calculate the sum of the discounted cash flows in columns H, I, J, and K in cells H19, I19, J19, and K19, respectively. These totals should equal the net present value of each project since that is what net present value is: the sum of the discounted cash flows of the project
. 3. Next, we will use some of Excel's automatic functions to calculate the NPV, IRR, and MIRR in cells C21-F21, C22-F22, and C23-F23, respectively. The NPV function requires the following format =NPV(Cost of Capital,CF1:CF10)+CF0. The IRR function is simply =IRR(CF0:CF10) and the MIRR function is =MIRR(CF0:CF10,Cost of Capital, Cost of Capital)
4. Next, we need to calculated the payback period. I have tried to simplify it somewhat by making all the paybacks occur between year 5 and 6. That means you only have to figure out how to write one formula to do the calculation. The formula for cell C24 should depend only on cells B13, C8, C14, and the sum of C9 to C13. Discounted paybacks have been calculated for you. 5. Next, use an =IF statement to determine which project to take if the projects are independent. In this case you should: - accept all the projects that have positive NPV and reject the ones with negative NPV - accept all the ones with IRR (or MIRR) > Cost of capital and reject the other ones. Your =IF statement should simply show either "Accept" or "Reject" in cells C29 to F31.
6. Next, use an =IF statement to detemine which project to take if they are mutually exclusive. This means you take the project with the highest NPV. One way to do this is by using an =MAX function to find the project with the highest NPV and then using an =IF statement to find the NPV that equals the maximum value.
7. Insert a textbox below the results and use it to discuss the implications of your results for the company's management. Among other things, you might want to discuss the relative merits of the four projects. You discussion should be between 75 and 150 words in length.
8. Lastly, you should make your spreadsheet look profession and also make it easy to read by using formatting and other font features, color, alignment, borders, etc.
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