Question 3: Capital budgeting (5 marks)

A company is considering a new project. The project costs $175,000 and has a 5-year life. During the Year 1, it will produce a cash flow of $46,000, which is expected to grow at 8% per annum from Year 2 to 5. The appropriate discount rate is 14% per annum. Please answer the following questions:

(a) Work out the Year 2 to 5 cash flows from this investment (with no added terminal value) (1 mark).

(b) Use a financial function to work out the Net Present Value (NPV) and the Internal Rate of Return (IRR) of the project (1 mark).

(c) Use a logical function to indicate whether the NPV and IRR suggest that this project should proceed (1 mark).

(d) Add a Data Table that displays how the net present value changes as the discount rate and growth rate vary between 12%-17% and 6%-11% respectively, as shown in the table below (2 marks - no marks for entering individual formulae into the table).

		Possible variations in annual growth rates in cash flows
		6.00%	7.00%	8.00%	9.00%	10.00%	11.00%
Possible variations in discount rate	12.00%
	13.00%
	14.00%
	15.00%
	16.00%
	17.00%

In excel please