Can you help me solve this problem: Using Microsoft Excel to calculate and analyze the Net...
Can you help me solve this problem: Using Microsoft Excel to calculate and analyze the Net Present Value (NPV), Internal Rate of Return (IRR), Accounting Rate of Return and Payback Period of the following investment.
| Initial Investment | $12,950 |
| Estimated Life | 10 years |
| Annual Cash Inflows | $3,000 |
| Cost of Capital | 12% |
Homework Answers
NPV and IRR are calculated using NPV and IRR functions in Excel
NPV is $4,001
IRR is 19%
Accounting rate of return = annual cash inflow / initial investment = $3000 / $12950 = 23%
Payback period is the time taken for the cumulative cash flows to equal zero
Payback period = 4 + (cash flow required in year 5 for cumulative cash flows to equal zero / year 5 cash flow) = 4 + ($950 / $3000) = 4.32 years
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