Reference no: EM133184267
Please read the following case study carefully.
Imagine you are working as an investment analyst for ABC Company, you are given 100,000$ to allocate for 5 different investment opportunities. You may select any combination of investments if the sum of initial cash outlays are equal to $100,000. Use NPV analysis in Excel to determine which out of these 5 Investments (or combination of) will be the most profitable.
Provide an answer to the following three questions in an Excel workbook.
1) If this $100,000 of capital is financed in the way shown below; calculate the WACC for this amount of capital. (corporate tax rate of 20%).
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Long term Loan
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Short term Loan
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Mortgage Loan
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Equity
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15,000$ @ 5%
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5,000$ @ 8.5%
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60,000$ @ 3%
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20,000$ @ 7%
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2) Find out with single investment or combination of investments yields the highest NPV. Use Excel to calculate each --> You will be graded on your use of formulas in excel.
3) For each Investment option calculate the IRR (Internal Rate of Return).
Option 1
A $25,000 initial investment which provides cash flows in the following way:
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Year 1
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Year 2
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Year 3
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Year 4
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Year 5
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8,000$
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9,000$
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11,000$
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$12,000
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$8,500
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Option 2
An annuity which provides payments of 7000$ at the end of year for 15 years. The initial investment is $75,000.
Option 3
A $50,000 initial investment that provides cash flows in the following way:
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Year 1
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Year 2
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Year 3
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Year 4
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Year 5
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Year 6
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Year 7
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2,000
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$4,000
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$8,000
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$10,000
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$12,000
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$14,000
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$16,000
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Option 4
A $50,000 initial investment that provides cash flows in the following way:
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Year 1
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Year 2
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Year 3
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Year 4
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Year 5
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Year 6
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Year 7
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25,000
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$4,000
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$8,000
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$10,000
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$12,000
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$1,000
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$1,000
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Option 5
A $100,000 Invesment which provides 5000$ per year for the first 5 years and then 10,000$ per year for an additional 9 years.
MAKE IN MS EXCEL