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Solve three and four. Thank you! Chapter 11/Appendix B Practice Example 1. Assume you have an investment opportunity that will cost $150,000 up front, and
Solve three and four. Thank you!
Chapter 11/Appendix B Practice Example 1. Assume you have an investment opportunity that will cost $150,000 up front, and is expected to vield $50.000 net cash flow per year for 10 years. Your minimum ROI is 15%. This investment is expected to have a $25.000 salvage value. Use each of the methods listed below to calculate net present value of this investment a. Use Present value of an annuity table. Present value of 1 table. b. Use mechanical formula for present value of an annuity mechanical formula for present value of 1. Use PV function in Excel. d. Accumulate NPV of each year's cash flow using Present value of 1 table For 2-4, use only method d (from above) to solve. 2. How would NPV change if you determined this investment to be high risk and increased the minimum ROI to 35%. The life of the investment is still 10 years. Same $25,000 salvage value. 3. How would NPV change if you determined that the life of the investment should be 30 years. Still assume that the investment is high risk and minimum ROI is 35%. Same $25,000 salvage value. How would NPV change if you determined that cash flow might be uneven and followed the schedules listed below. Assume for 4 that the life of the investment is 10 years and minimum ROIS 15% Same $25,000 salvage value. Scenario A Year 1:$100,000 Year 2: $90,000 Year 3: $80,000 Year 4: $70,000 Year 5: $30,000 Year 6: $30,000 Year 7: $30,000 Year 8: $30,000 Year 9: $20,000 Year 10: $20,000 Scenario B Year 1: $20,000 Year 2: $20,000 Year 3: $30,000 Year 4: $30,000 Year 5: $30,000 Year 6: $30,000 Year 7: $70,000 Year 8: $80,000 Year 9: $90,000 Year 10: $100,000 3. Solution Rate Years 35% 30 Year Payment P.V. Factor Net present value 0.74074074 0.54869684 0.40644211 0.30106823 0.2230135 0.16519519 0.1223668 0.09064208 0.06714228 0.04973502 0.03684076 0.02728945 0.02021441 0.01497363 0.01109158 0.00821599 0.00608592 0.00450809 0.00333932 0.00247357 0.00183228 0.00135724 0.00100536 0.00074471 0.00055164 0.00040862 0.00030268 0.00022421 0.00016608 0.00012302 $0.00 4a. Solution Rate 15% Years 10 Year OU WNO Payment P.V. Factor Net present value 11 0.869565217 0.756143667 0.657516232 0.571753246 0.497176735 0.432327596 0.37593704 0.326901774 0.284262412 0.247184706 $0.00 15% Rate Years 10 Year Payment P.V. Factor Net present value 000 UwN- 0.869565217 0.756143667 0.657516232 0.571753246 0.497176735 0.432327596 0.37593704 0.326901774 0.284262412 0.247184706 $0.00Step by Step Solution
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