5 of 25 Concepts completedOrdering QuestionClick and drag on elements in orderPlace the steps involved in the calculation of the discounted payback period in order.InstructionsMcGrawHillAdd the discounted cash flows.Accept if the discounted payback period is less than some prescribed number of years.Discount the cash flows using the discount rate.Need help? Review these concept resources.Determine the discounted payback period.Rate your confidence to submit your answer. HighMediumLow© 2024 McGraw Hill. All Rights Reserved. Privacy Center Terms of UseExit Assignment XReading✓

Here's the sequence for calculating the discounted payback period:Discount the cash flows using the…

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Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter26: Capital Budgeting (capbud)

Section: Chapter Questions

Problem 6R: Reset the Data Section of the CAPBUD2 worksheet to the original values. In requirement 4, you...

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Reset the Data Section of the CAPBUD2 worksheet to the original values. In requirement 4, you assessed the sensitivity of the investment’s internal rate of return to changes in some of the input data. This was done in a trial-and-error fashion. Click the Chart sheet tab. Presented on the screen is a graphical analysis of the sensitivity of the internal rate of return to changes in annual cash flows. To demonstrate the usefulness of such a chart, note the ease with which you are able to answer the following questions that might be of interest to the owner: What annual cash flow (approximately) is required to: earn 0% rate of return? _______________ earn 10% rate of return? _______________ earn over 20% rate of return? _______________ Approximately, how much is the rate of return reduced for each drop of $10,000 annual cash flow? When the assignment is complete, close the file without saving it again. Worksheet. The CAPBUD2 worksheet handles only cash inflows that are even in amount each year. Many capital projects generate uneven cash inflows. Suppose that the new store had expected cash earnings of $80,000 per year for the first two years, $140,000 for the next four years, and $220,000 for the last four years. The new store will generate the same total cash return ($1,600,000) as in the original problem, but the timing of the cash flows is different. Alter the CAPBUD2 worksheet so that the NPV and IRR calculations can be made whether there are even or uneven cash flows. When done, preview the printout to make sure that the worksheet will print neatly on one page, and then print the worksheet. Save the completed file as CAPBUDT. Hint: One suggestion is to label column F in the scratch pad as Uneven cash flows. Enter the uneven cash flows for each year. Modify FORMULA3 to include these cash flows. Modify the formulas in the range E30 to E39 to include the new data. Then set cell E10 (estimated Annual Net Cash Inflow) to zero. When you have even cash flows, use cell E10 and set column F in the scratch pad to zeros. If you have uneven cash flows, set cell E10 to zero and fill in column F in the scratch pad. Note that this solution causes garbage to come out in cells E15 and E16 because those formulas were not altered. Check figure for uneven cash flows: NPV (cell E17), $68,674. Chart. Using the CAPBUD2 file, develop a chart just like the one used in requirement 6 to show the sensitivity of net present value to changes in cost of the investment amount from $440,000 to $500,000 (use $10,000 increments). Complete the Chart Tickler Data Table and use it as a basis for preparing the chart. Enter your name somewhere on the chart. Save the file again as CAPBUD2. Print the chart.
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Consider the following project cash flow. YEAR CASH FLOW 0 -1000 1 500 2 500 3 500 4 500 5 500 Use this information to calculate the Internal Rate of Return by linear interpolation(the trial and error method). WITH WORKING PLEASE
Use the information provided to answer the questions.5.1 Use the information provided below to calculate the following. Where applicable, use the presentvalue tables provided in APPENDICES 1 and 2 that appear after QUESTION 5.5.1.1 Calculate the Payback Period of Project A (expressed in years, months and days). 5.1.2Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to twodecimal places). 5.1.3 Calculate the Net Present Value of each project (with amounts rounded off to the nearest Rand). 5.1.4 Use your answers from question 5.1.3 to recommend the project that should be chosen. Motivateyour choice.
A project has the following cash flows set out below. What is the profitability index of this project if the relevant discount rate is 2 percent? Enter your final answer to two decimal places. Year Cash flow 0 -1,745 1 537 2 2,066 3 3,912
Accounting question
2. Discounted Payback (DCPB) and IRR evaluations. Use the cash flow situation (table below) to answer. a. Determine the DCPB based on a MARR rate of 4.0% b. Determine the IRR Year Cash Flow (in $1000's) 0 -1250 1 +350 2 3 +300 +250 4 +200 5 +150 6 +100 7 +50
Can you tell me how to get the 0% to 25% rate numbers? I have to plot the NPV profiles. Year Project A Discounted cashflow Discounted cashflow 0 -50,000 -$50,000.00 -$50,000.00 1 25,000 $22,727.27 $23,584.91 2 20,000 $16,528.93 $17,799.93 3 10,000 $7,513.15 $8,396.19 4 5,000 $3,415.07 $3,960.47 5 5,000 $3,104.61 $3,736.29 NPV $3,289.02 $7,477.79 IRR 14% 14% 10% 6% Year Project B Discounted cashflow Discounted cashflow 0 -50,000 -$50,000.00 -$50,000.00 1 15,000 $13,636.36 $14,150.94 2 15,000 $12,396.69 $13,349.95 3 15,000 $11,269.72 $12,594.29 4 15,000 $10,245.20 $11,881.40 5 15,000 $9,313.82 $11,208.87 NPV $6,861.80 $13,185.46 IRR 15% 15% Rate Project A Project B 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25%
You have just assessed a project, involving an immediate cash outflow followed by a series of cash inflows over the next seven years, by deducing the NPV and the IRR. You have now discovered that you have underestimated the discount rate. Correcting for the underestimation will have the following effects, relative your original deductions: NPV IRR A reduce no change B no change no change C increase reduce D increase increase

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