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tanimpala296Lv1
28 Sep 2019
Capital Budgeting Glacier Creek Textiles is planning to purchase new manufacturing equipment. The equipment has an acquisition cost of $100,000, an estimated useful life of five years and no residual value. The company uses a 12% rate of return to evaluate capital projects. The cash flows for the five years: Year Net Cash Outflows Net Cash Inflows Amount invested 0 ($100,000) 1 25,000 2 29,000 3 26,000 4 28,000 5 35,000 Requirements 1. Compute the accounting rate of return. 2. Compute the net present value of the investment using Excel's PV function. 3. Compute the net present value of the investment using Excel's NPV function. 4. Compute the profitability index, rounded to two decimal places. 5. Compute the internal rate of return of the investment using Excel's IRR function. Display to two decimal places, but do not round. Excel Skills 1. Function PV 2. Function NPV 3. Function IRR
Evaluate Glacier Creek Textiles' new manufacturing equipment. Data Annual discount Rate 0.12 Cash Flow Year 0 (Cost) (100,000) Cash Flow Year 1 25,000 Cash Flow Year 2 29,000 Cash Flow Year 3 26,000 Cash Flow Year 4 28,000 Cash Flow Year 5 35,000 Useful Life in years 5 Residual value 0 Requirement 1 Compute the Accounting Rate of Return Average annual operating income Average amount invested Accounting Rate of Return - ARR xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxxxxx Requirement 2 Compute the net present value of the investment using Excel's PV function. Period Cash Flows 1 (22,321) Note: The first period is shown as an example. 2 xxxxxxxx 3 xxxxxxxx 4 xxxxxxxx 5 xxxxxxxx Present value of net cash flows xxxxxxxx Note: PV calculates the present value as a negative amount. Cost of Asset xxxxxxxx Net Present Value xxxxxxxx Requirement 3 Compute the net present value of the investment using Excel's NPV function Present value of net cash flows xxxxxxxxxx Cost of asset xxxxxxxxxx Net Present Value xxxxxxxxxx Requirement 4 Compute the profitability index, rounded to two decimal places. Profitability index xxxxxxxxxx Requirement 5 Compute the internal rate of return of the investment using Excel's IRR function. Display to two decimal places, but do not round. IRR xxxxxxxxx Note: IRR requires a negative amount for the investment.
Places with xxxxx's are what needs to be filled in, and it's for excel so if I could see the references to which numbers and the formula used that would be helpful. Thank you!!
Capital Budgeting | |||||||||||
Glacier Creek Textiles is planning to purchase new manufacturing equipment. The equipment has an acquisition cost of $100,000, an estimated useful life of five years and no residual value. The company uses a 12% rate of return to evaluate capital projects. The cash flows for the five years: | |||||||||||
Year | Net Cash Outflows | Net Cash Inflows | |||||||||
Amount invested | |||||||||||
0 | ($100,000) | ||||||||||
1 | 25,000 | ||||||||||
2 | 29,000 | ||||||||||
3 | 26,000 | ||||||||||
4 | 28,000 | ||||||||||
5 | 35,000 | ||||||||||
Requirements | |||||||||||
1. Compute the accounting rate of return. | |||||||||||
2. Compute the net present value of the investment using Excel's PV function. | |||||||||||
3. Compute the net present value of the investment using Excel's NPV function. | |||||||||||
4. Compute the profitability index, rounded to two decimal places. | |||||||||||
5. Compute the internal rate of return of the investment using Excel's IRR function. Display to two decimal places, but do not round. | |||||||||||
Excel Skills | |||||||||||
1. Function PV | |||||||||||
2. Function NPV | |||||||||||
3. Function IRR | |||||||||||
Evaluate Glacier Creek Textiles' new manufacturing equipment. | ||||||
Data | ||||||
Annual discount Rate | 0.12 | |||||
Cash Flow Year 0 (Cost) | (100,000) | |||||
Cash Flow Year 1 | 25,000 | |||||
Cash Flow Year 2 | 29,000 | |||||
Cash Flow Year 3 | 26,000 | |||||
Cash Flow Year 4 | 28,000 | |||||
Cash Flow Year 5 | 35,000 | |||||
Useful Life in years | 5 | |||||
Residual value | 0 | |||||
Requirement 1 | Compute the Accounting Rate of Return | |||||
Average annual operating income | Average amount invested | Accounting Rate of Return - ARR | ||||
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx | xxxxxxxxxxxxxx | xxxxxxxxxxxxxxxxx | ||||
Requirement 2 | Compute the net present value of the investment using Excel's PV function. | |||||
Period | Cash Flows | |||||
1 | (22,321) | Note: The first period is shown as an example. | ||||
2 | xxxxxxxx | |||||
3 | xxxxxxxx | |||||
4 | xxxxxxxx | |||||
5 | xxxxxxxx | |||||
Present value of net cash flows | xxxxxxxx | Note: PV calculates the present value as a negative amount. | ||||
Cost of Asset | xxxxxxxx | |||||
Net Present Value | xxxxxxxx | |||||
Requirement 3 | Compute the net present value of the investment using Excel's NPV function | |||||
Present value of net cash flows | xxxxxxxxxx | |||||
Cost of asset | xxxxxxxxxx | |||||
Net Present Value | xxxxxxxxxx | |||||
Requirement 4 | Compute the profitability index, rounded to two decimal places. | |||||
Profitability index | xxxxxxxxxx | |||||
Requirement 5 | Compute the internal rate of return of the investment using Excel's IRR function. | |||||
Display to two decimal places, but do not round. | ||||||
IRR | xxxxxxxxx | Note: IRR requires a negative amount for the investment. |
Places with xxxxx's are what needs to be filled in, and it's for excel so if I could see the references to which numbers and the formula used that would be helpful. Thank you!!
Keith LeannonLv2
30 Sep 2019