SOLUTION: Southeastern University Module 12 Net Present Value & Cash Flows Worksheet

Complete the following questions using Microsoft Excel. No other submission format is allowed. Review the grading ru
Paderborn Industries is considering two investment projects. The estimated cash flow in SARs for each project is as follo
Year
1
2
3
4
5
Last Expansion (8,000,000)
2.100.000
2.100.000
2.100.000
2.100.000
2.100.000
Retail Store Expansion (8,000,000)
3.040.000
2.710.000
2.060.000
1.750.000
940.000
The company has decided that the appropriate discount rate is: 10%
Required:
1. Calculate the payback for each project (to 3 decimal points)
project #1
project #2
years
cash flows
years
cash flows
0
1
2
3
4
5
-8,000,000
2,100,000
2,100,000
2,100,000
2,100,000
2,100,000
0
1
2
3
4
5
-8,000,000
3,040,000
2,710,000
2,060,000
1,750,000
940,000
payback = initial cost / annual cash flow
= 3.810
2. Calculate the Net Present Value (NPV) for each project
project #1
years
0
1
2
3
4
5
cash flows
-8,000,000
2,100,000
2,100,000
2,100,000
2,100,000
2,100,000
rate
10%
NPV
-39,347.784
3.Calculate the Present Value Index (PI) for each project (round to 3 decimal places)
project #1
-0.005
Present value index =
Total present value
Amount to b
Present value index =
project #2
0.041
Total present value
Amount to b
4.Calculate the Internal Rate of Return (IRR) for each project (Round to 2 decimal places)
project #1
10%
project #2
12%
5.Advise management on which, if either, project to pursue and why
ion format is allowed. Review the grading rubric to confirm you are meeting the assignment requirements.
cash flow in SARs for each project is as follows:
040.000
710.000
060.000
750.000
40.000
project #2
cash flows
cumulative cashflow
-8,000,000
3,040,000
2,710,000
2,060,000
1,750,000
940,000
-4,960,000
-2,250,000
-190,000
-0.10857
payback =
project #2
years
0
1
2
3
4
5
cash flows
-8,000,000
3,040,000
2,710,000
2,060,000
1,750,000
940,000
rate
10%
o 3 decimal places)
ndex =
Total present value of net cash flow
Amount to be invested
NPV
329,953.866
ndex =
Total present value of net cash flow
Amount to be invested

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