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a. Use Excel to determine the net present value, profitability index, and internal rate of return for each of the seven project.

a. Use Excel to determine the net present value, profitability index, and internal rate of return for each of the seven project.

Essentials Of Investments
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
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Capital rationing Management of Frisco Films is considering the following capital projects: Project Cost Annual After-Tax Cash Flows Number of Years New film studios $20,000,000 $3.100,000 15 Cameras and equipment 3,200,000 800,000 8 Land improvement 5,000,000 1,180,000 10 Motion picture #1 17,800,000 4,970,000 Motion picture #2 11,400,000 3,920,000 4 Motion picture #3 8,000,000 2,300,000 7 Corporate aircraft 2,400,000 770,000 5 Assume that all projects have no salvage value and that the firm uses a discount rate of 10 percent. Management has decided that only $25,000,000 can be spent in the current year for capital projects. a. Use Excel to determine the net present value, profitability index, and internal rate of return for each of the seven project. Note: Round NPV (final answer) to the nearest whole dollar. Note: Round Pl to two decimal places (i.e. round 1.466 to 1.47). Note: Round IRR percentage to one decimal place (i.e. round 8.555% to 8.6%). Project Name NPV PI IRR Film studios $ 3,578,910 x 1.18 13 % v v Cameras & equipment 1,067,920 x0 1.33 v 18.6 % v Land improvement 2,250,628 x 1.45 v 19.7 % v Motion picture #1 1,040,276 x 1.06 v 12.3 % v Motion picture #2 1,026,008 x 1.09 v 14.1 % v Motion picture #3 3,197,320 x 1.4 v 19.8 % x Corporate aircraft 518,916 x 1.22 v 16.3 % x
Transcribed Image Text:Capital rationing Management of Frisco Films is considering the following capital projects: Project Cost Annual After-Tax Cash Flows Number of Years New film studios $20,000,000 $3.100,000 15 Cameras and equipment 3,200,000 800,000 8 Land improvement 5,000,000 1,180,000 10 Motion picture #1 17,800,000 4,970,000 Motion picture #2 11,400,000 3,920,000 4 Motion picture #3 8,000,000 2,300,000 7 Corporate aircraft 2,400,000 770,000 5 Assume that all projects have no salvage value and that the firm uses a discount rate of 10 percent. Management has decided that only $25,000,000 can be spent in the current year for capital projects. a. Use Excel to determine the net present value, profitability index, and internal rate of return for each of the seven project. Note: Round NPV (final answer) to the nearest whole dollar. Note: Round Pl to two decimal places (i.e. round 1.466 to 1.47). Note: Round IRR percentage to one decimal place (i.e. round 8.555% to 8.6%). Project Name NPV PI IRR Film studios $ 3,578,910 x 1.18 13 % v v Cameras & equipment 1,067,920 x0 1.33 v 18.6 % v Land improvement 2,250,628 x 1.45 v 19.7 % v Motion picture #1 1,040,276 x 1.06 v 12.3 % v Motion picture #2 1,026,008 x 1.09 v 14.1 % v Motion picture #3 3,197,320 x 1.4 v 19.8 % x Corporate aircraft 518,916 x 1.22 v 16.3 % x
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