key capital budgeting quiz 3

Quiz 3 Version B Key to Quiz 4 1 of 5

LSE Dr Farooq Chaudhry Spring Semester 2011

Project X Discount Rate 11.2500%

Year Cash Flows PV Factor NPV IRR

0 (60,000.00) (60,000.00) 1.000000 (60,000.00) (60,000.00)1 15,000.00 (45,000.00) 0.898876 13,483.15 (46,516.85) 1.531793 22,976.89 2 17,500.00 (27,500.00) 0.807979 14,139.63 (32,377.23) 1.376893 24,095.62 3 15,000.00 (12,500.00) 0.726273 10,894.10 (21,483.13) 1.237656 18,564.84 4 15,500.00 3,000.00 0.652830 10,118.86 (11,364.27) 1.112500 17,243.75 5 17,500.00 20,500.00 0.586813 10,269.23 (1,095.04) 1.000000 17,500.00

Sum 3.672771 58,904.96 100,381.11

=4+(-C$9/B$10) MIRR =IRR(B$5:B$10,E$2)

3.83 (1,095.04) 10.84% 10.5280% 2 Points 2 Points 2 Points 2 Points 1 Points

Project Y Discount Rate 11.2500%


0 (50,000.00) (50,000.00) 1.000000 (50,000.00) (50,000.00)1 14,000.00 (36,000.00) 0.898876 12,584.27 (37,415.73) 1.531793 21,445.10 2 12,500.00 (23,500.00) 0.807979 10,099.73 (27,316.00) 1.376893 17,211.16 3 13,000.00 (10,500.00) 0.726273 9,441.55 (17,874.45) 1.237656 16,089.53 4 17,500.00 7,000.00 0.652830 11,424.52 (6,449.93) 1.112500 19,468.75 5 15,000.00 22,000.00 0.586813 8,802.20 2,352.27 1.000000 15,000.00

Sum 3.672771 52,352.27 89,214.54

=4+(-C$24/B$25) 4.73 MIRR

3.53 2,352.27 12.28% 13.0498% 2 Points 2 Points 2 Points 2 Points 1 Points

Part B Accept project Y because it has a higher NPV. 1 Point

Cumulative Cash Flows

Present Value of Cash Flows

Cumulative Present Value of

Cash Flows

Future value facture for TV Calculation

Terminal Value Computation

Payback period

Discounted Payback Period

More than 5 years because project have

negative NPV

From Discounted

Payback calculation

=((I11/-B5)^(1/A10))-1




Cash Flows



Payback period


From Discounted

Payback calculation

=((I11/-B5)^(1/A10))-1 =IRR(B$20:B$25,E$2)

A B C D E F G H I J123

4

56789101112

13

1415161718

19

2021222324252627

28

29303132

Name: ______________________________Section:_____________ Quiz 4 2 of 5

LSE Dr Farooq Chaudhry Fall Semester 2012

Project X Discount Rate 10.2500%


0 (25,000.00) (25,000.00) 1.000000 (25,000.00) (25,000.00)1 5,000.00 (20,000.00) 0.907029 4,535.15 (20,464.85) 1.477455 7,387.28 2 7,500.00 (12,500.00) 0.822702 6,170.27 (14,294.58) 1.340096 10,050.72 3 10,000.00 (2,500.00) 0.746215 7,462.15 (6,832.43) 1.215506 12,155.06 4 12,500.00 10,000.00 0.676839 8,460.49 1,628.06 1.102500 13,781.25 5 15,000.00 25,000.00 0.613913 9,208.70 10,836.76 1.000000 15,000.00

Sum 3.766700 35,836.76 58,374.31

=3+(-C8/B9) =4+(-F9/E10) MIRR =IRR(B$5:B$10,E$2)

3.2000 3.8232 10,836.76 0.1848 23.2919% 2 Points 2 Points 2 Points 2 Points 1 Points

Project Y Discount Rate 10.2500%


0 (30,000.00) (30,000.00) 1.000000 (30,000.00) (30,000.00)1 15,000.00 (15,000.00) 0.907029 13,605.44 (16,394.56) 1.477455 22,161.83 2 12,500.00 (2,500.00) 0.822702 10,283.78 (6,110.78) 1.340096 16,751.20 3 10,000.00 7,500.00 0.746215 7,462.15 1,351.38 1.215506 12,155.06 4 7,500.00 15,000.00 0.676839 5,076.30 6,427.67 1.102500 8,268.75 5 5,000.00 20,000.00 0.613913 3,069.57 9,497.24 1.000000 5,000.00

Sum 3.766700 39,497.24 64,336.84

=3+(-C$23/B$24) =4+(-F$24/E$25) MIRR

2.25 2.81 9,497.24 0.1648 24.6696% 2 Points 2 Points 2 Points 2 Points 1 Points

Part B Accept Project X because it has a higher NPV




Cash Flows



Payback period


From Discounted

Payback calculation

=((I11/-B5)^(1/A10))-1




Cash Flows



Payback period


From Discounted

Payback calculation

=((I11/-B5)^(1/A10))-1 =IRR(B$20:B$25,E$2)

A B C D E F G H I J123

4

56789101112

13

1415161718

19

2021222324252627

28

29303132

Quiz 3 Version BQuiz 3 Version ASheet2

key capital budgeting quiz 3

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