EBK FINANCIAL ANALYSIS WITH MICROSOFT E
8th Edition
ISBN: 9781337515528
Author: Mayes
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 12, Problem 4P
a.
Summary Introduction
Interpretation: Initial capital outlay, cash flows after tax and terminal cash flow of this project needs to be computed.
Concept introduction:Capital Budgeting technique is the most useful tool for
b.
Summary Introduction
Interpretation:
Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.
Payback period 0.84
Discounted Payback period 0.9299
NPV $1,883,164
PI 3.8044
IRR 119%
MIRR 52%
Payback period: It is the period in which cash flow of investment covers the initial investment. It can be computed shown below:
Discounted payback period: It is the period in which discounted cash flow of investment covers the initial investment. It can be computed shown below:
Net present value: NPV is the sum of present value of the cash flows and initial investment when discounted at 11%. It can be computed as:
Profitability Index: It is used to analyze the profitability of an investment wherein its cash flow is divided by the initial investment It can be computed as:
IRR& MIRR:
The formula used to compute IRR and MIRR is as follows:
c.
Interpretation: A scenario analysis is required.
Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.
1. Click on “Data” menu and select “scenario Manager” under “what if Analysis” option, then click on “add” option.Then rename the scenario name and select changing cells which need to replace.
2. Enter values which need to be resulted in that scenario, accordingly.
3. Then click on “summary” option to get the various scenario analysis.
4. Scenario Analysis will represent the final output in given scenario.
c.
Summary Introduction
Interpretation: A scenario analysis is required.
Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.
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EBK FINANCIAL ANALYSIS WITH MICROSOFT E
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