HW#1_Excel_Problem_Set_Solution

HW#1_Excel_Problem_Set_Solution - Internal Rate of Return...

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0% 2% 4% 6% 8% 10% 12% 14% 16% $(2,000,000) $(1,000,000) $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 Internal Rate of Return Discount Rate NPV
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Discount Rate 12.00% Growth in Sales (%) 0% Growth in Expenses(%) 0.0% YEAR 1 2 3 4 operating Costs/unit 5 0.95 0.95 0.95 Total Operating Costs $500,000 $4,000,000 $4,000,000 $4,000,000 Fixed costs $200,000 $200,000 $200,000 $200,000 Total Costs $700,000 $4,200,000 $4,200,000 $4,200,000 Total Cost per Unit $7.00 $1.00 $1.00 $1.00 Revenues Units Sold 100,000 4,200,000 4,200,000 4,200,000 Price $1 $1 $1 $1 Revenues $100,000 $4,200,000 $4,200,000 $4,200,000 Net Cash Flow $(600,000) $- $- $- PV $(535,714) $- $- $- Alternative PV formula 535,714 - - - One Time Cash Flows year PV Initial Investment $(13,000,000) 0 $(13,000,000) Working Capital $(500,000) 0 $(500,000) salvage $- 10 $- Return of WC $500,000 10 $160,987 NPV NPV $(13,874,728) Internal Rate of Return Err:523 Year 0 Cash Flows $(13,500,000) Discount Rate (%) NPV 0% $7,300,000 2% $5,402,658 4% $3,790,780 6% $2,413,731 8% $1,230,920 10% $209,622 12% $(676,683) 14% $(1,449,599)
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5 6 7 8 9 10 0.95 0.95 0.95 0.95 0.95 0.95 $4,000,000 $4,000,000 $4,000,000 $4,000,000 $4,000,000 $4,000,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $4,200,000 $4,200,000 $4,200,000 $4,200,000 $4,200,000 $4,200,000 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 4,200,000 4,200,000 4,200,000 4,200,000 4,200,000 4,200,000 $1 $1 $1 $1 $1 $1 $4,200,000 $4,200,000 $4,200,000 $4,200,000 $4,200,000 $4,200,000 $- $- $- $- $- $- $- $- $- $- $- $- - - - - - - 1 2 3 4 5 6 7 $(600,000) $- $- $- $- $- $-
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8 9 10 $- $- $500,000
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Cost Over-run Page 5 -14950000
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Sales Growth (wrong) Page 6 0.05
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Interest Rate Paid to Bank 8% Building Costs $13,000,000 Working capital $500,000 Total Startup costs $13,500,000 % Debt 100% Total amount financed $13,500,000 Years financed 10 Year 1 2 3 4 Annual Net Cash Flows $(600,000) $- $- $- Principle Payment ($931,898) ($1,006,450) ($1,086,966) ($1,173,923) Interest Payment ($1,080,000) ($1,005,448) ($924,932) ($837,975)
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This homework help was uploaded on 02/20/2009 for the course AEM 4270 taught by Professor Gloy,b.a. during the Spring '08 term at Cornell University (Engineering School).

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HW#1_Excel_Problem_Set_Solution - Internal Rate of Return...

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