Calculate the following problems using Microsoft® Excel®:
Calculate the NPV for
each project and determine which project should be accepted.
Project A Project B Project C Project D
Inital Outlay (105,000.000) (99,000.00) (110,000.00) (85,000.00)
Inflow year 1 53,000.00 51,000.00 25,000.00 45,000.00
Inflow year 2 50,000.00 47,000.00 55,000.00 50,000.00
Inflow year 3 48,000.00 41,000.00 15,000.00 30,000.00
Inflow year 4 30,000.00 52,000.00 21,000.00 62,000.00
Inflow year 5 35,000.00 40,000.00 35,000.00 68,000.00
Rate 7% 10% 13% 18%
Your company is considering three independent projects. Given the following cash flow information, calculate the payback period for each. If your company requires a three-year payback before an investment can be accepted, which project(s) would be accepted?
Project D Project E Project F
Cost 205,000.00 179,000.00 110,000.00
Inflow year 53,000.00 51,000.00 25,000.00
Inflow year 2 50,000.00 87,000.00 55,000.00
Inflow year 3 48,000.00 41,000.00 21,000.00
Inflow year 4 30,000.00 52,000.00 9,000.00
Inflow year 5 24,000.00 40,000.00 35,000.00
Using market value and book value (separately), find the adjusted WACC, using 30% tax rate.
Component Balance Sheet Value Market Value Cost of Capital
Debt 5,000,000.00 6,850,000.00 8%
Preferred Stock 4,000,000.00 2,200,00.00 10%
Common Stock 2,000,000.00 5,600,000.00 13%
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