ACCT1021 Final: Chapter Twelve Thorough Review
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8 Dec 2016
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I need further clarification on a question that was alreadyanswered. It was on Feb. 5, 2016 about the "Hampton Company". Ineed the Net Present Value and the Internal Rate of Return put intoan Excel format with the following headings:
Part 4 NetPresent Value | ||||||||
Before Tax | After Tax | 11% PV | Present | |||||
Item | Year | Amount | Tax % | Amount | Factor | Value | ||
Cost of equipment | 0 | |||||||
Cost of training | 0 | 0 | ||||||
Annual cash savings | 1-5 | |||||||
Tax savings due to depreciation | 1-5 | |||||||
Disposal value | 5 | |||||||
Net Present Value | ||||||||
Part 5 Internal Rateof Return | ||||||||
Excel function method to calculate IRR | ||||||||
This function requires that you have only one cashflow per period (Period 0 through Period 5, for our example). | ||||||||
This means that no annuity figures can be used. Thechart for our example can be revised as follows. | ||||||||
After Tax | ||||||||
Item | Year | Amount | ||||||
Cost of machine and training | 0 | |||||||
Year 1 inflow | 1 | |||||||
Year 2 inflow | 2 | |||||||
Year 3 inflow | 3 | |||||||
Year 4 inflow | 4 | |||||||
Year 5 inflow | 5 | |||||||
The IRR function will require the range of cashflows, beginning with the initial cash outflow for theinvestment | ||||||||
and progressing through each year of the project.You also have to include an initial guess for the | ||||||||
possible IRR. The formula is:=IRR(values,guess) | ||||||||
IRR Function | IRR(f84..f89,.30) | #NUM! |