1. Compute (using the built-in NPV function in Excel) the net present value (NPV) for the proposed investment. (Negative amount should be indicated by a minus sign. Enter your answer in whole dollars, not in millions, rounded to nearest whole dollar.) 2. Compute (using the built-in IRR function in Excel) the internal rate of return (IRR) for the proposed investment. (Round your final answer 2 decimal places.) 3. What is the breakeven selling price for this investment, that is, the price that would yield an NPV of $0? (Use the Goal Seek function in Excel to determine the breakeven selling price. The following online tutorial may be helpful to you: Goal Seek Tutorial) (Enter your answer in whole dollars, not in millions, rounded to nearest whole dollar.)
1. Compute (using the built-in NPV function in Excel) the net present value (NPV) for the proposed investment. (Negative amount should be indicated by a minus sign. Enter your answer in whole dollars, not in millions, rounded to nearest whole dollar.) 2. Compute (using the built-in IRR function in Excel) the internal rate of return (IRR) for the proposed investment. (Round your final answer 2 decimal places.) 3. What is the breakeven selling price for this investment, that is, the price that would yield an NPV of $0? (Use the Goal Seek function in Excel to determine the breakeven selling price. The following online tutorial may be helpful to you: Goal Seek Tutorial) (Enter your answer in whole dollars, not in millions, rounded to nearest whole dollar.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
100%
Transcribed Image Text:MaxiCare Corporation, a not-for-profit organization, specializes in health care for senior citizens. Management is considering whether
to expand operations by opening a new chain of care centers in the inner city of large metropolitan areas. For a new facility, initial cash
outlays for lease, renovations, net working capital, training, and other costs are expected to be about $15 million. The corporation
expects the cash inflows of each new facility in Year 1 to equal zero. Net cash inflows are expected to increase to $1 million in each of
years 2 and 3; $2.5 million in year 4; and $3 million in each of years 5 through 10. The lease agreement for the facility will expire at the
end of year 10, and MaxiCare expects the cost to close a facility will pretty much exhaust all cash proceeds from the disposal. Cost of
capital for MaxiCare is estimated as 12%. Assume that all cash flows occur at year end.
Required:
1. Compute (using the built-in NPV function in Excel) the net present value (NPV) for the proposed investment. (Negative amount
should be indicated by a minus sign. Enter your answer in whole dollars, not in millions, rounded to nearest whole dollar.)
2. Compute (using the built-in IRR function in Excel) the internal rate of return (IRR) for the proposed investment. (Round your final
answer 2 decimal places.)
3. What is the breakeven selling price for this investment, that is, the price that would yield an NPV of $0? (Use the Goal Seek function
in Excel to determine the breakeven selling price. The following online tutorial may be helpful to you: Goal Seek Tutorial) (Enter your
answer in whole dollars, not in millions, rounded to nearest whole dollar.)
1.
Estimated NPV
2. Estimated IRR
3
Breakeven selling price
%
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