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fm3_problems01

# fm3_problems01 - Discount rate NPV IRR Year 0 1 2 3 4 5 6 7...

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Discount rate 8% NPV 71.01 #MACRO? IRR 10.56% #MACRO? Year Cash flow 0 -600 1 100 2 100 3 100 4 100 5 100 6 100 7 100 8 100 9 100 10 100 Decision: The NPV > 0 and hence you should purchase the asset. Note that the IRR > discount rate, which leads to the same decision.

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Cost 10,000 Payment \$2,983.16 #MACRO? Interest 15% Division of payment between: Year Interest #MAC 1 10,000.00 2,983.16 1,500.00 1,483.16 ### 2 8,516.84 2,983.16 1,277.53 1,705.63 3 6,811.22 2,983.16 1,021.68 1,961.47 4 4,849.74 2,983.16 727.46 2,255.69 5 2,594.05 2,983.16 389.11 2,594.05 6 0.00 #MACRO? Principal at beginning of year Payment at end of year
CRO?

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Discount rate 15% Initial payment 129.29 NPV -226.52 #MACRO? Use Solver (see screen shot below Year Cash flow 0 -1000.00 1 100.00 #MACRO? 2 110.00 #MACRO? 3 121.00 #MACRO? 4 133.10 5 146.41 6 161.05 7 177.16 8 194.87 9 214.36 10 235.79 11 259.37 A B C D E F G 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
w) to find the answer. H I J K L 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

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Discount rate 20% NPV 76.71 Data table 76.71 ### Year Cash flow 0% -99.33 0 -500 4% -29.47 1 600 8% 17.72 2 300 12% 48.39 3 300 16% 66.97 4 200 20% 76.71 5 -1,000 24% 79.96 28% 78.5 IRR1 6.34% #MACRO? 32% 73.6 IRR2 60.20% #MACRO? 36% 66.24 40% 57.15 44% 46.87 48% 35.81 Since the NPV > 0 for interest 52% 24.27 rates between 6.34% and 60.20%, 56% 12.48 60% 0.61 if the discount rate is 20%. 64% -11.21 68% -22.89 72% -34.36 you would invest in the project 0 0 20 40 60 80 100 A B C D E F G 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
0% 10% 20% 30% 40% 50% 60% 70% 80% H I J K L M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

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IRR? 10.00% LOAN TABLE Year Cash flow Year Interest Principal 0 -800 1 800.00 300.00 80.00 220.00 1 300 2 580.00 200.00 58.00 142.00 2 200 3 438.00 150.00 43.80 106.20 3 150 4 331.80 122.00 33.18 88.82 4 122 5 242.98 133.00 24.30 108.70 5 133 6 134.28 <-- Should be zero for IRR IRR 5.07% ### Division of payment between: Principal at beginning of year Payment at end of year A B C D E F G H 1 2 3 4 5 6 7 8 9 10 11 12
IRR? 3.00% LOAN TABLE Year Cash flow Year Interest Principal 0 -800 1 800.00 300.00 24.00 276.00 1 300 2 524.00 200.00 15.72 184.28 2 200 3 339.72 150.00 10.19 139.81 3 150 4 199.91 122.00 6.00 116.00 4 122 5 83.91 133.00 2.52 130.48 5 133 6 -46.57 <-- Should be zero for IRR IRR 5.07% ### Division of payment between: Principal at beginning of year Payment at end of year A B C D E F G H I 1 2 3 4 5 6 7 8 9 10 11 12 13

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J K L M N 1 2 3 4 5 6 7 8 9 10 11 12 13
Loan principal 100,000 Term (years) 5 Interest 13% Annual payment \$28,431.45 #MACRO?

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Loan principal 15,000 Interest rate annual 15% monthly 1.25% #MACRO? Loan term (months) 48 Monthly payment \$417.46 #MACRO? Month Payment Interest Principal 1 15,000.00 417.46 187.50 229.96 2 14,770.04 417.46 184.63 232.84 3 14,537.20 417.46 181.72 235.75 4 14,301.46 417.46 178.77 238.69 5 14,062.76 417.46 175.78 241.68 6 13,821.09 417.46 172.76 244.70 7 13,576.39 417.46 169.70 247.76 8 13,328.63 417.46 166.61 250.85 9 13,077.78 417.46 163.47 253.99 10 12,823.79 417.46 160.30 257.16 11 12,566.63 417.46 157.08 260.38 12 12,306.25 417.46 153.83 263.63 13 12,042.62 417.46 150.53 266.93 14 11,775.69 417.46 147.20 270.27 15 11,505.42 417.46 143.82 273.64 16 11,231.78 417.46 140.40 277.06 17 10,954.71 417.46 136.93 280.53 18 10,674.19 417.46 133.43 284.03 19 10,390.15 417.46 129.88 287.58 20 10,102.57 417.46 126.28 291.18 21 9,811.39 417.46 122.64 294.82 22 9,516.57 417.46 118.96
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fm3_problems01 - Discount rate NPV IRR Year 0 1 2 3 4 5 6 7...

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