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Page 1246 Ch 26 - Ill 26-25 Payments made annually at end of year, Interest is quoted Annually Capital Investment Net Annual

You have been hired as an analyst at ABC company and asked to calculate the financial feasibility of the following project. A

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Answer 1

Answer #1

PV using Financial Calculator: Cash flow*PV Factor => 39000*(12%, 5 years) => 39000 * 3.6048 = 140587.20
PV using Exel:

A B

1 RATE 12%

2 NPER 5

3 PMT 39000

4 Formula: =pv(B1,B2,B3) $140,586.27

NPV: (using PV of cash-flows as per excel since its more accurate)

PV of Cash flows (as above)	140586.27
Less: Capital Investment	130000.00
NPV	10586.27

----------------------------------------------------------------------------------------------------------------------------------------------------------------

Capital Invested	250000
Net Annual cash flows	35000
Annuity payment	10 years
Interest rate	8%

PV using Financial Calculator: Cash flow*PV Factor => 35000*(8%, 10 years) => 35000* 6.71 = 234850.
PV using Exel:

	A	B
1	RATE	8%
2	NPER	10
3	PMT	35000
4	Formula: =pv(B1,B2,B3)	$234852.85

NPV: (using PV of cash-flows as per excel since its more accurate)

PV of Cash flows (as above)	234852.85
Less: Capital Investment	250000
NPV	-15147.5

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Answer 2

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