EXCEL EXERCISE #5: Cost-Benefit Analysis 1.
This example is taken from the book of Fundamentals of Financial Management by Dr. Eugene Brigham– Page 454 problem. 21stCentury is considering another project; Project Y. Project Y has an up front cost of $200,000 and an economic life of three years. If the companydevelops the project, its after-tax operating costs will be $100,000 a year;however, the project is expected to produce after-tax cash inflows of $180,000 ayear. Thus, the project’s estimated cash flows are as follows: ABCDEF1Cost-Benefit Analysis: Plan Y 2TotalDiscountPresent3YearCostsBenefitsBenefitsFactorValue40 $200,000.00 $0.00 51 $200,000.00 $180,000.00 62 $200,000.00 $180,000.00 73 $200,000.00 $180,000.00 8 9 NPV =10Discount11Rate =2.Highlight the cell range B4:D7. Open the FORMAT menu, select CELLS. Select the category CURRENCY select the format $1,234.10. Repeat this procedure for the cell range F4:F9. 3.Highlight cell B10. Open the FORMAT menu, select CELLS. Select the category PERCENT, select two decimal places.