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Use Excel® to solve the following problem. An eight-year life project has an initial capital expenditure of $450,000, annual income of $300,000 beginning at the end of year 1, and annual operating costs of $80,000 beginning at the end of year 1. Calculate the IRR for the following cases:

Use Excel® to solve the following problem. An eight-year life project has an initial capital expenditure of $450,000, annual income of $300,000 beginning at the end of year 1, and annual operating costs of $80,000 beginning at the end of year 1. Calculate the IRR for the following cases:

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Use Excel® to solve the following problem. An eight-year life project has an initial capital expenditure of $450,000, annual income of $300,000 beginning at the end of year 1, and annual operating costs of $80,000 beginning at the end of year 1. Calculate the IRR for the following cases: (a) Assume the cash flows given are in escalated dollars and the escalated dollar MARR is 10%, 20%, and 30%. (b) Assume the cash flows given are in today dollars and pairs of escalation rates are: a. Incomes are escalated at 7% and costs are escalated at 6% b. Incomes are escalated at 3% and costs are escalated at 5% c. Incomes are escalated at 4% and costs are escalated at 4% (c) Assume inflation is 49% and rework all portions of part (b) in terms of constant dollars.
Transcribed Image Text:Use Excel® to solve the following problem. An eight-year life project has an initial capital expenditure of $450,000, annual income of $300,000 beginning at the end of year 1, and annual operating costs of $80,000 beginning at the end of year 1. Calculate the IRR for the following cases: (a) Assume the cash flows given are in escalated dollars and the escalated dollar MARR is 10%, 20%, and 30%. (b) Assume the cash flows given are in today dollars and pairs of escalation rates are: a. Incomes are escalated at 7% and costs are escalated at 6% b. Incomes are escalated at 3% and costs are escalated at 5% c. Incomes are escalated at 4% and costs are escalated at 4% (c) Assume inflation is 49% and rework all portions of part (b) in terms of constant dollars.
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