Reference no: EM131723108
Business Finance Project - Capital Budgeting
The goal of this project is to explore the topic of capital budgeting. The project requires you to work in Excel with the provided spreadsheet.
Capital Budgeting
Flower Engineering is considering two mutually exclusive investments. The projects' expected net cash flows are as follows:
|
Time
|
Expected Net Cash Flow
|
|
Project A
|
Project B
|
|
0
|
($380)
|
($680)
|
|
1
|
($300)
|
$200
|
|
2
|
($200)
|
$200
|
|
3
|
($100)
|
$200
|
|
4
|
$600
|
$200
|
|
5
|
$600
|
$200
|
|
6
|
$926
|
$200
|
|
7
|
($200)
|
$200
|
Note that cash outflows (costs) are given in parenthesis. Employ the Excel file to answer the following questions:
Part 1: Net Present Value
A) Use the Excel NPV function to calculate the NPV for each project at each cost of capital.
B) Construct NPV profiles (a data table of project NPVs relative to differing costs of capital) for Projects A and B and graph them in one plot (label the x-axis, y-axis, and title).
Part 2: Internal Rate of Return
C) Use the Excel IRR function to calculate each projects IRR.
D) Use the Excel MIRR function to calculate each projects MIRR for each cost of capital.
Part 3: Payback
E) Calculate the cumulative cash flow and the regular payback using the formula for each project.
F) Calculate the profitability index for each project.
Attachment:- Project.rar