| Problem 1 | |||||||||||
| Period | Project A | ||||||||||
| CF0 | -100 | Please turn in one sheet tab only in your homework this week, with | |||||||||
| CF1 | 50 | these 4 problems answered in full. Add cosmetics as possible, | |||||||||
| CF2 | 40 | and make sure to check your formulas and functions. | |||||||||
| CF3 | 40 | ||||||||||
| CF4 | 15 | ||||||||||
| RRR (Discount) | 15% | ||||||||||
| NPV | |||||||||||
| Problem 2 | |||||||||||
| Period | Project A | Project B | |||||||||
| CF0 | -100 | -100 | |||||||||
| CF1 | 50 | 70 | |||||||||
| CF2 | 70 | 75 | |||||||||
| CF3 | 40 | 10 | |||||||||
| RRR | 10% | 10% | |||||||||
| NPV | |||||||||||
| Which Project would you choose, assuming they were mutually exclusive? | |||||||||||
| I would choose project | |||||||||||
| Would it make a difference if the required rate were 14%, instead of 10%? | |||||||||||
| Project A | Project B | ||||||||||
| NPV | |||||||||||
| @14%, I would choose | |||||||||||
| Problem 3 | |||||||||||
| CF0 | -8900 | ||||||||||
| CF1 | 2150 | ||||||||||
| CF2 | 2150 | ||||||||||
| CF3 | 2150 | ||||||||||
| CF4 | 2150 | ||||||||||
| CF5 | 2150 | ||||||||||
| CF6 | 2150 | ||||||||||
| CF7 | 2150 | ||||||||||
| CF8 | 2150 | ||||||||||
| CF9 | 2150 | ||||||||||
| What RRR, or discount rate, would cause NPV to be 0? | |||||||||||
| Please show how you came to that conclusion using the NPV function | |||||||||||
| Problem 4 | |||||||||||
| Period | Project A | Project B | |||||||||
| CF0 | -50000 | -100000 | |||||||||
| CF1 | 26000 | 14000 | |||||||||
| CF2 | 20000 | 18000 | |||||||||
| CF3 | 16000 | 22000 | |||||||||
| CF4 | 12000 | 26000 | |||||||||
| CF5 | 24000 | ||||||||||
| CF6 | 19000 | ||||||||||
| CF7 | 26000 | ||||||||||
| CF8 | 40000 | ||||||||||
| RRR | 11.00% | 11.00% | |||||||||
| NPV | |||||||||||
| Assume these projects are mutually exclusive. | |||||||||||
| Which project would you select based on NPV? | |||||||||||
| Is this a fair comparison? Yes or No, and why or why not? | |||||||||||
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