Using the Payback Method, IRR, and NPV Problems
Purpose of Assignment
The purpose of this assignment is to allow the student tocalculate the project cash flow using net present value (NPV),internal rate of return (IRR), and the payback methods.
Assignment Steps
Resources: CorporateFinance
Calculate the following time value of moneyproblems in Microsoft Excel or Word document. You must show all ofyour calculations.
If you want to accumulate $500,000 in 20 years, how much do youneed to deposit today that pays an interest rate of 15%?
What is the future value if you plan to invest $200,000 for 5years and the interest rate is 5%?
What is the interest rate for an initial investment of $100,000to grow to $300,000 in 10 years?
If your company purchases an annuity that will pay $50,000/yearfor 10 years at a 11% discount rate, what is the value of theannuity on the purchase date if the first annuity payment is madeon the date of purchase?
What is the rate of return required to accumulate $400,000 ifyou invest $10,000 per year for 20 years. Assume all payments aremade at the end of the period.
Calculate the project cash flow generated forProject A and Project B using the NPV method.
Which project would you select, and why?
Which project would you select under the payback method? Thediscount rate is 10% for both projects.
Use Microsoft® Excel® to prepare youranswer.
Note that a similar problem is in the textbook in Section5.1.
Sample Template for Project A and Project B:
Show all work.
Submit the all calcluations.
Click the Assignment Files tab to submit yourassignment.
Using the Payback Method, IRR, and NPV Problems
Purpose of Assignment
The purpose of this assignment is to allow the student tocalculate the project cash flow using net present value (NPV),internal rate of return (IRR), and the payback methods.
Assignment Steps
Resources: CorporateFinance
Calculate the following time value of moneyproblems in Microsoft Excel or Word document. You must show all ofyour calculations.
If you want to accumulate $500,000 in 20 years, how much do youneed to deposit today that pays an interest rate of 15%?
What is the future value if you plan to invest $200,000 for 5years and the interest rate is 5%?
What is the interest rate for an initial investment of $100,000to grow to $300,000 in 10 years?
If your company purchases an annuity that will pay $50,000/yearfor 10 years at a 11% discount rate, what is the value of theannuity on the purchase date if the first annuity payment is madeon the date of purchase?
What is the rate of return required to accumulate $400,000 ifyou invest $10,000 per year for 20 years. Assume all payments aremade at the end of the period.
Calculate the project cash flow generated forProject A and Project B using the NPV method.
Which project would you select, and why?
Which project would you select under the payback method? Thediscount rate is 10% for both projects.
Use Microsoft® Excel® to prepare youranswer.
Note that a similar problem is in the textbook in Section5.1.
Sample Template for Project A and Project B:
Show all work.
Submit the all calcluations.
Click the Assignment Files tab to submit yourassignment.
Related questions
Cash Payback Period, Net Present Value Analysis, and QualitativeConsiderations The plant manager of Shenzhen Electronics Company isconsidering the purchase of new automated assembly equipment. Thenew equipment will cost $375,000. The manager believes that the newinvestment will result in direct labor savings of $75,000 per yearfor 10 years.
| Present Value of an Annuity of $1 atCompound Interest | |||||
| Year | 6% | 10% | 12% | 15% | 20% |
| 1 | 0.943 | 0.909 | 0.893 | 0.870 | 0.833 |
| 2 | 1.833 | 1.736 | 1.690 | 1.626 | 1.528 |
| 3 | 2.673 | 2.487 | 2.402 | 2.283 | 2.106 |
| 4 | 3.465 | 3.170 | 3.037 | 2.855 | 2.589 |
| 5 | 4.212 | 3.791 | 3.605 | 3.353 | 2.991 |
| 6 | 4.917 | 4.355 | 4.111 | 3.785 | 3.326 |
| 7 | 5.582 | 4.868 | 4.564 | 4.160 | 3.605 |
| 8 | 6.210 | 5.335 | 4.968 | 4.487 | 3.837 |
| 9 | 6.802 | 5.759 | 5.328 | 4.772 | 4.031 |
| 10 | 7.360 | 6.145 | 5.650 | 5.019 | 4.192 |
a. What is the payback period on thisproject?
years
b. What is the net present value, assuming a10% rate of return? Use the table provided above. Round to thenearest whole dollar.
| Net present value | $ |
