UNIT
3: TEXTBOOK PROBLEMS
CHAPTER
7: PROBLEM 1b
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Project
A
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Project
B
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Discount
Rate
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15%
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15%
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Year
0
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($14,500)
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($9,800)
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Year
1
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$8,500
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$4,700
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Year
2
|
$6,800
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$4,200
|
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Year
3
|
$2,800
|
$4,100
|
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NPV
=
|
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(Note:
You will choose the project that has the highest NPV since it creates the
most wealth.)
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CHAPTER
7: PROBLEM 2
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Year
|
A.
|
B.
|
C.
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0
|
$3,200
|
$4,600
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$7,900
|
|
1
|
$825
|
$825
|
$825
|
|
2
|
$825
|
$825
|
$825
|
|
3
|
$825
|
$825
|
$825
|
|
4
|
$825
|
$825
|
$825
|
|
5
|
$825
|
$825
|
$825
|
|
6
|
$825
|
$825
|
$825
|
|
7
|
$825
|
$825
|
$825
|
|
8
|
$825
|
$825
|
$825
|
|
Payback
Period =
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CHAPTER
7: PROBLEM 8
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Year
|
Project
A
|
Project
B
|
|
0
|
($5,200)
|
($3,600)
|
|
1
|
1,800
|
1,300
|
|
2
|
3,200
|
2,100
|
|
3
|
2,200
|
1,800
|
|
IRR
=
|
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CHAPTER
7: PROBLEM 9
|
Discount
Rate
|
15%
|
|
|
Year
|
||
|
0
(Initial Cost)
|
($185,000)
|
$185,000
|
|
1
|
62,000
|
|
|
2
|
62,000
|
|
|
3
|
62,000
|
|
|
4
|
62,000
|
|
|
5
|
62,000
|
|
|
6
|
62,000
|
|
|
7
|
62,000
|
|
|
First
find the NPV
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(Use
the built-in NPV formula in Excel but exclude using the Year 0 cash outflow.)
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Now
calculate the Profitability Index
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(Use
the positive amount of the initial cost in cell C44 in the formula. You would
only accept the project if the Profitability Index is above 1.)
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CHAPTER
8: PROBLEM 1
|
Cost
of Souffle Maker
|
$27,000
|
($27,000)
|
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Economic
Life
|
6
|
years
|
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#
of Souffles produced per year
|
2,300
|
|
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Cost
to make each Souffle
|
$2
|
|
|
Price
of each Souffle
|
$7
|
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Discount
Rate
|
14%
|
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Tax
Rate
|
34%
|
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Step
1: First calculate the Operating Cash Flow.
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Step
2: Place the answer you get for your Operating Cash Flow in the year 1 thru
year 6 cells below.
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Year
1
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Year
2
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Year
3
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Year
4
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Year
5
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Year
6
|
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Step
3: Now find the NPV. Be sure to include the initial cost by using cell C58 as
it is negative.
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NPV
=
|
|
(You
will accept the project if the NPV is positive.)
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File name: UNIT 3 TEXTBOOK
PROBLEMS.xlsx File type: . xlsx PRICE:$15
