Pr 5-1
All input values are shown in yellow. Only these values need changed to review algo versions.
Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.
Input variables:
Project C0 C1 C2 C3 C4
A -5000 1000 1000 3000 0
B -1000 0 1000 2000 3000
C -5000 1000 1000 3000 5000
b. Cutoff year 2
c. Cutoff year 3
d. Discount rate 10%
Solution and Explanation:
a. (Algos only - see column F for the static version) Static version:
Project A 3 3
Project B 2 2
Project C 3 3
b. (Algos only - see column F for the static version)
Project A Reject Reject
Project B Accept Accept
Project C Reject Reject
c. (Algos only - see column F for the static version)
Project A Accept Accept
Project B Accept Accept
Project C Accept Accept
d.
Project A NPV -$1,011
Project B NPV $3,378
Project C NPV $2,405
Positive NPV's BC
e. 1
f.
Accept negative NPV No
Reject positive NPV Yes
Notes:
For the algos:
The payback period for Project A must be >2 and <=3 years.
The payback period for Project B must be >2 and <=3 years.
The payback period for Project C must >1 and <= 2 years.
ew algo versions.
Pr 5-3
All input values are shown in yellow. Only these values need changed to review algo versions.
Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.
Input variables:
C0 -$6,750
C1 $4,500
C2 $18,000
Discount rate 1 0%
Discount rate 2 50%
Discount rate 3 100%
Solution and Explanation:
a.
NPV 1 $15,750
NPV 2 $4,250
NPV 3 $0
b.
IRR 100%
Notes:
Pr 5-4
All input values are shown in yellow. Only these values need changed to review algo versions.
Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.
Input variables:
C0 5000
C1 4000
C2 -11000
IRR 13%
Opportunity cost 10%
Solution and Explanation:
Borrowing or investing Borrowing
IRR>Opportunity cost Yes
Accept offer No
NPV -$454.55
Notes:
The problem must have "Borrowing" cash flows and the IRR must be > Opportunity cost.
The NPV must be negative.
Pr 5-6
All input values are shown in yellow. Only these values need changed to review algo versions.
Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.
Input variables:
C0 C1 C2 IRR(%)
Alpha -$400,000 $241,000 $293,000 21%
Beta -200,000 131,000 172,000 31%
Opportunity cost 8%
Solution and Explanation:
Incremental C0 -$200,000
Incremental C1 $110,000
Incremental C2 $121,000
Incremental IRR 10%
Project selection Alpha
Notes:
Alpha must have the larger C0 (more negative) and the larger C1 and C2 (more positive).
Beta's IRR > Opportunity cost
algo versions.
Pr 5-8
All input values are shown in yellow. Only these values need changed to review algo versions.
Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.
Input variables:
C0 C1 C2 C3 C4 C5
A -$1,000 $1,000 $0 $0 $0 $0
B -2,000 1,000 1,000 4,000 1,000 1,000
C -3,000 1,000 1,000 0 1,000 1,000
a. Opportunity cost 10%
c. Cutoff period years 3
e. Cutoff period years 3
Solution and Explanation:
a.
NPVA ($90.91)
NPVB $4,044.73
NPVC $39.47
b.
Payback A years 1 (Create data set so = 1)
Payback B years 2 (Create data set so = 2)
Payback C years 4.00
c.
Project A Accept
Project B Accept
Project C Reject
d.
Project A:
C0 -$1,000.00
Discounted C1 $909.09
Discounted payback A Never
Project B:
C0 -$2,000
Discounted C1 $909.09
Discounted C2 $826.45
Discounted C3 $3,005.26
Discounted C4 $683.01
Discounted C5 $620.92
Discounted payback B 2.09 (Data set must be 2+ years)
Project C:
C0 -$3,000
Discounted C1 $909.09
Discounted C2 $826.45
Discounted C3 $0.00
Discounted C4 $683.01
Discounted C5 $620.92
Discounted payback C 4.94 (Data set must be 4+ years)
e.
Accept Project B (constant)
Pr 5-13
All input values are shown in yellow. Only these values need changed to review algo versions.
Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.
Input variables:
C1 -$250,000
C2 -$250,000
C3 $650,000
Additional C1 -$550,000
Additional C2 $650,000
Additional C3 $0
Solution and Explanation:
Incremental C1 -$300,000
Incremental C2 $900,000
Incremental C3 -$650,000
Incremental IRR 21.13%
Incremental IRR 78.87%
Notes:
Pr 5-14
All input values are shown in yellow. Only these values need changed to review algo versions.
Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.
Input variables:
Project C0 C1 IRR NPV 10%
D -$10,000 $20,000 100% $8,181.82
E -20,000 35,000 75% $11,818.18
Discount rate 10%
Solution and Explanation:
PI Project D .82
PI Project E .59
Incremental C0 -$10,000
Incremental C1 $15,000
Incremental NPV $3,636.36
Incremental PI .36
Select project Project E
Notes:
Project E must be larger than Project D.
