H14 NPV IRR Capital Rationing.xlsx

H14 NPV IRR Capital Rationing.xlsx - NPV and IRR...

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NPV and IRR 0 1 2 3 4 5 CF(A) -100 50 50 20 CF(B) -100 15 20 25 50 50 CF(C) -100 90 30 12 Cumulative CF(B) -100 -85 -65 -40 10 60 IRR NPV Considers all cash flows x Recognizes time value of money x Easy to communicate Computable (existence) ? Unambiguous (uniqueness) ? Consistent with value maximization Implementation cost Payback Period Consider a project (A) which requires an initial investment of $100 and has expected cash flows of $50, a) Calculate the project's NPV using a discount rate of 10%. b) Calculate the project's IRR. c) Draw the project's NPV profile.
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WACC NPV(k=WACC) IRR NPV(k=0%) 10% Project cash flows 11% Project financing 12% Project wacc $50 and $20 in years 1, 2, and 3, respectively.
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(incremental cash flows)
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Project NPV INV Raw Material ACC IND ACC NPV ACC INV ACC Raw Mat A $ 72,658 $ 628,200 7,200 B $ 36,418 $ 352,100 4,800 C $ 212,150 $ 1,245,600 14,400 D $ 70,925 $ 814,300 9,600 E $ 11,400 $ 124,500 1,200 F $ 56,842 $ 985,000 12,000 G $ 93,600 $ 2,356,400 28,800 H $ 65,350 $ 226,900 2,400 I $ 48,842 $ 1,650,000 20,400 J $ 39,815 $ 714,650 8,400 SUM $ 708,000 $ 9,097,650 109,200 LIMIT $ 5,000,000 100,000 Project NPV INV Raw Material ACC IND ACC NPV ACC INV ACC Raw Mat A $ 72,658 $ 628,200 7,200 B $ 36,418 $ 352,100 4,800 C $ 212,150 $ 1,245,600 14,400 D $ 70,925 $ 814,300 9,600 E $ 11,400 $ 124,500 1,200 F $ 56,842 $ 985,000 12,000 G $ 93,600 $ 2,356,400 28,800 H $ 65,350 $ 226,900 2,400 I $
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