Solve the problems below using well-formattedExcel solutions. Do not hardcode numbers in the formulasâ¦..only usecell references to the input data. I will change the input data inyour problem to check alternate solutions. You will turn in acomplete working Excel spreadsheet with your solution. Given the following set of cash flows: Period Cash Flow 1 $ 40,000 2 $ 35,000 3 $ 30,000 4 $ 25,000 5 $ 20,000 6 $ 15,000 7 $ 10,000 8 $ 5,000 1. If your required rate of return is 8% per year,what is the present value of the above cash flows? 2. If your required rate of return is 8% per year,what is the future value of the above cash flows? 3. Suppost that you are offered another investmentthat is identical, except the cash flows are reveresed. Compute thePV and FV, is this investment worth more or less than #1 and#2? 4. If you paid $150,000 for the originalinvestment, what average annual rate of return would you earn? Whatreturn would you earn on the reversed cash flows?
| Solve the problems below using well-formattedExcel solutions. Do not hardcode numbers in the formulasâ¦..only usecell references to the input data. I will change the input data inyour problem to check alternate solutions. You will turn in acomplete working Excel spreadsheet with your solution. | ||||||||||||||
| Given the following set of cash flows: | ||||||||||||||
| Period | Cash Flow | |||||||||||||
| 1 | $ 40,000 | |||||||||||||
| 2 | $ 35,000 | |||||||||||||
| 3 | $ 30,000 | |||||||||||||
| 4 | $ 25,000 | |||||||||||||
| 5 | $ 20,000 | |||||||||||||
| 6 | $ 15,000 | |||||||||||||
| 7 | $ 10,000 | |||||||||||||
| 8 | $ 5,000 | |||||||||||||
| 1. If your required rate of return is 8% per year,what is the present value of the above cash flows? | ||||||||||||||
| 2. If your required rate of return is 8% per year,what is the future value of the above cash flows? | ||||||||||||||
| 3. Suppost that you are offered another investmentthat is identical, except the cash flows are reveresed. Compute thePV and FV, is this investment worth more or less than #1 and#2? | ||||||||||||||
| 4. If you paid $150,000 for the originalinvestment, what average annual rate of return would you earn? Whatreturn would you earn on the reversed cash flows? | ||||||||||||||
Related questions
Please show working
Given the following set of cash flows:
| Period | Cash Flows |
| 1 | $45,000 |
| 2 | $40,000 |
| 3 | $35,000 |
| 4 | $30,000 |
| 5 | $25,000 |
a. If your required rate of return is 7% per year, what is the present value of the above cash flows? Future value?
b. Now, suppose that you are offered another investment that is identical, except that the cash flows are reversed (i.e., cash flow 1 is 25,000, cash flow 2 is 30,000, etc.). Is this worth more, or less, than the original investment? Why?
c. If you paid $130,000 for the original investment, what average annual rate of return would you earn? What return would you earn on the reversed cash flows?
d. Still assuming that your required return is 7%, would you be willing to purchase either of these investments? Explain why, or why not.
Capstone Quarry is analyzing whether a new contract proposal will be a good idea. The relevant data is shown below. The net working capital will be paid in the same time period as the cost of the equipment and will be recovered at the end of the project. Remember to calculate the after-tax gain or loss of salvage as part of your terminal cash flow.
| Capstone Quarry Company Contract Analysis | |
| Amount of Rock Salt per Year | 23,000 Tons |
| Revenue per Ton | $ 145 |
| Cost of Equipment | $ 2,750,000 |
| Life(years) | 5 |
| MACRS Class | 5 |
| Fixed Cost per year | $ 475,000 |
| Var Cost/Ton | $ 85 |
| Actual Salvage | $ 105,000 |
| Change in NWC | $ 85,000 |
| Required Return | 12% |
| Tax Rate | 34% |
Find the cash flows for each year
Net present value
Payback period
Discounted payback
IRR
MIRR
Hint:
| Annual Cash Flows for Capstone Quarry | ||||||
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Initial Outlay | ||||||
| Unit Sales | ||||||
| Sales | ||||||
| Variable Costs | ||||||
| Fixed Costs | ||||||
| Depreciation | ||||||
| Taxable Cash Flows | ||||||
| Taxes | ||||||
| Add: Depreciation | ||||||
| Annual After-Tax Cash Flow | ||||||
| Terminal Cash Flow | ||||||
| Total Annual Cash Flows | ||||||
Use the following data for the remaining problems.
Capstone Quarry is analyzing whether a new contract proposal will be a good idea. The relevant data is shown below. The net working capital will be paid in the same time period as the cost of the equipment and will be recovered at the end of the project. Remember to calculate the after-tax gain or loss of salvage as part of your terminal cash flow.
| Capstone Quarry Company Contract Analysis | |
| Amount of Rock Salt per Year | 23,000 Tons |
| Revenue per Ton | $ 145 |
| Cost of Equipment | $ 2,750,000 |
| Life(years) | 5 |
| MACRS Class | 5 |
| Fixed Cost per year | $ 475,000 |
| Var Cost/Ton | $ 85 |
| Actual Salvage | $ 105,000 |
| Change in NWC | $ 85,000 |
| Required Return | 12% |
| Tax Rate | 34% |
20) Find the cash flows for each year
21) Net present value
22) Payback period
23) Discounted payback
24) IRR
25) MIRR
Hint:
| Annual Cash Flows for Capstone Quarry | ||||||
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Initial Outlay | ||||||
| Unit Sales | ||||||
| Sales | ||||||
| Variable Costs | ||||||
| Fixed Costs | ||||||
| Depreciation | ||||||
| Taxable Cash Flows | ||||||
| Taxes | ||||||
| Add: Depreciation | ||||||
| Annual After-Tax Cash Flow | ||||||
| Terminal Cash Flow | ||||||
| Total Annual Cash Flows | ||||||
