Perform a financial analysis for a project using the format provided in Figure 4-5. Assume that the projected costs and benefits for this project are spread over four years as follows: Estimated costs are $300,000 in Year 1 and $40,000 each year in Years 2, 3, and 4. Estimated benefits are $0 in Year 1 and $120,000 each year in Years 2, 3, and 4. Use a 7 percent discount rate, and round the discount factors to two decimal places. Create a spreadsheet or use the business case financials template on the Companion website to calculate and clearly display the NPV, ROI, and year in which payback occurs. In addition, write a paragraph explaining whether you would recommend investing in this project, based on your financial analysis
Perform a financial analysis for a project using the format provided in Figure 4-5. Assume that the projected costs and benefits for this project are spread over four years as follows: Estimated costs are $300,000 in Year 1 and $40,000 each year in Years 2, 3, and 4. Estimated benefits are $0 in Year 1 and $120,000 each year in Years 2, 3, and 4. Use a 7 percent discount rate, and round the discount factors to two decimal places. Create a spreadsheet or use the business case financials template on the Companion website to calculate and clearly display the NPV, ROI, and year in which payback occurs. In addition, write a paragraph explaining whether you would recommend investing in this project, based on your financial analysis
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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Perform a financial analysis for a project using the format provided in Figure 4-5. Assume that the projected costs and benefits for this project are spread over four years as follows: Estimated costs are $300,000 in Year 1 and $40,000 each year in Years 2, 3, and 4. Estimated benefits are $0 in Year 1 and $120,000 each year in Years 2, 3, and 4. Use a 7 percent discount rate, and round the discount factors to two decimal places. Create a spreadsheet or use the business case financials template on the Companion website to calculate and clearly display the
Transcribed Image Text:Financial Analysis for Project Name
Created by:
Date:
Note: Change the inputs, shown in green below (i.e. interest rate, number of years, costs, and
benefits). Be sure to double-check the formulas based on the inputs.
Discount rate
Assume the project is completed in Year 0
Costs
Discount factor
Discounted costs
Benefits
Discount factor
Discounted benefits
Discounted benefits - costs
Cumulative benefits - costs
ROI
Assumptions
Enter assumptions here
8.00%
0
140,000
1.00
140,000
Year
2
1
40,000 40,000 40,000
0.93
0.86
0.79
34,400
31,600 243,200
37,200
3 Total
0
200,000 200,000
200,000
0.79
1.00
0.93
0.86
0 186,000 172,000 158,000 516,000
(140,000) 148,800 137,600 126,400 272,800
(140,000) 8,800 146,400 272,800
112%
Payback in Year 1
NPV
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