All answers must be entered as a formula Click OK to begin. OK Excel SIM: Comparison of Capital Budgeting Methods 1. Determine the payback period for an investment 2. Evaluate the acceptability of an investment project using the net present value method. 3. Evaluate the acceptability of an investment project using the internal rate of return method. 4. Compute the simple rate of return for an investment Comparison of Capitol Budgeting Methods - Excel FORMULAS HAN % STU A Alignment Number Conditional Format as Call Editing Formatting" Table Styles 7 - FILE HOME INSERT PAGE LAYOUT DATA REVIEW VIEW Sign In Calibri -11 Paste Cells Clipboard Font Styles A1 Laurman, Inc. is considering the following project: A B C D E $ 1 Laurman, Inc. is considering the following project: 2 Required investment in equipment 3 Project life 4 Salvage value 2,205,000 7 225,000 5 6 The project would provide net operating income each year as follows: Sales $ 7 8 2,750,000 16m non l/atlamla aunavas ar Clipboard Font Styles A1 1 X Laurman, Inc. is considering the following project: B D $ 8 2,750,000 1,600,000 1,150,000 9 $ Laurman, Inc. is considering the following project: 2 Required investment in equipment $ 2,205,000 3 Project life 7 4 Salvage value 225,000 5 6 The project would provide net operating income each year as follows: 7 Sales Variable expenses Contribution margin 10 Fixed expenses: 11 Salaries, rent and other fixed out of pocket costs $ 520,000 12 Depreciation 350,000 13 Total fixed expenses 14 Net operating income 15 16 Company discount rate 18% 17 18 1. Compute the annual net cash inflow from the project. 19 | 20 2. Complete the table to compute the net present value of the investment. 21 22 Year(s) 870,000 280.000 7 21 22 Year(s) 23 Now 1-7 24 Initial investment 25 Annual cost savings 26 Salvage value of the new machine 27 Total cash flows 28 Discount factor 1.000 29 Present value of the cash flows 30 Net present value 31 32 Use Excel's PV function to compute the present value of the future cash flows 33 Deduct the cost of the investment 34 Net present value 35 36 3. Use Excel's RATE function to compute the project's internal rate of return 37 38 4. Compute the project's payback period. 39 40 5. Compute the project's simple rate of return. 41 42 years 43 AA Sheet1 E 100% READY All answers must be entered as a formula Click OK to begin. OK Excel SIM: Comparison of Capital Budgeting Methods 1. Determine the payback period for an investment 2. Evaluate the acceptability of an investment project using the net present value method. 3. Evaluate the acceptability of an investment project using the internal rate of return method. 4. Compute the simple rate of return for an investment Comparison of Capitol Budgeting Methods - Excel FORMULAS HAN % STU A Alignment Number Conditional Format as Call Editing Formatting" Table Styles 7 - FILE HOME INSERT PAGE LAYOUT DATA REVIEW VIEW Sign In Calibri -11 Paste Cells Clipboard Font Styles A1 Laurman, Inc. is considering the following project: A B C D E $ 1 Laurman, Inc. is considering the following project: 2 Required investment in equipment 3 Project life 4 Salvage value 2,205,000 7 225,000 5 6 The project would provide net operating income each year as follows: Sales $ 7 8 2,750,000 16m non l/atlamla aunavas ar Clipboard Font Styles A1 1 X Laurman, Inc. is considering the following project: B D $ 8 2,750,000 1,600,000 1,150,000 9 $ Laurman, Inc. is considering the following project: 2 Required investment in equipment $ 2,205,000 3 Project life 7 4 Salvage value 225,000 5 6 The project would provide net operating income each year as follows: 7 Sales Variable expenses Contribution margin 10 Fixed expenses: 11 Salaries, rent and other fixed out of pocket costs $ 520,000 12 Depreciation 350,000 13 Total fixed expenses 14 Net operating income 15 16 Company discount rate 18% 17 18 1. Compute the annual net cash inflow from the project. 19 | 20 2. Complete the table to compute the net present value of the investment. 21 22 Year(s) 870,000 280.000 7 21 22 Year(s) 23 Now 1-7 24 Initial investment 25 Annual cost savings 26 Salvage value of the new machine 27 Total cash flows 28 Discount factor 1.000 29 Present value of the cash flows 30 Net present value 31 32 Use Excel's PV function to compute the present value of the future cash flows 33 Deduct the cost of the investment 34 Net present value 35 36 3. Use Excel's RATE function to compute the project's internal rate of return 37 38 4. Compute the project's payback period. 39 40 5. Compute the project's simple rate of return. 41 42 years 43 AA Sheet1 E 100% READY
