Excel for Corporate Finance Professionals” by Michael McDonald from LinkedIn Learning from Wk 1. Sections “NPV Tests in Excel” and “NPV and Scenario Analysis” may be helpful for understanding this exercise.
Assignment Directions
Individually, complete all sets and parts of the
Financial Exercises
individually to prepare for your Wk 3 – Group: Financial Exercises Summary assignment. The file contains the following 5 worksheet tabs to complete:
- Wk 3: Set 1, Part 1
- Wk 3: Set 1, Part 2
- Wk 3: Set 2, Part 1
- Wk 3: Set 2, Part 2
- Wk 3: Set 2, Part 3
>Index
– Set , Part 1
Wk 3 – Set 1, Part 1 Wk 3 Exercises: Set 1, Part 1 questions using either the financial functions in Excel® or the Present Value and Future Value formulas shown:
,000 in 8 years, how much do you need to deposit in the bank today if the account pays an interest rate of 9%?
Insert your answer. years. How much do you need today if you expect to earn 12% while you are investing to pay for your child’s college?
Insert your answer. . You have been offered $3,000 in 4 years for providing $2,000 today into a business venture with a friend. If interest rates are 10%, is this a good investment for you?
Insert your answer. Insert your answer. if it is invested in an account with an annual interest rate of 8%?
Insert your answer. Insert your answer. &”Arial,Regular”&10 Wk 2 Financial Exercises – Part 1 &”Arial,Regular”&10HCS/385 v4
&”Arial,Regular”&8Copyright© 2020 by University of Phoenix. All rights reserved.
&”Arial,Regular”&8Copyright© 2020 by University of Phoenix. All rights reserved. Wk 3 – Set 1, Part 2 0 1 2 3 4 5 60,000 60,000 60,000 60,000 Insert your answer. Insert your NPV calculation. Is this a good project for the business to accept? Explain why or why not. Year 0 1 2 3 4 Year 0 1 2 3 4 5 175,000 175,000 175,000 175,000 Insert your answer. Insert your answer. 68,000 Insert your answer. Year 0 1 2 3 4 5 6 82,500 77,000 Explain why or why not the company should move forward with this endeavor. &”Arial,Regular”&10Wk 2 Financial Exercises – Part 2 &”Arial,Regular”&10HCS/385 v4 Wk 3 – Set 2, Part 1 Wk 3 – Set 2, Part 2 Insert your answer. Insert your answer. Insert your answer. Wk 3 – Set 2, Part 3 Problem Answer Insert your answer. Insert your answer. Insert your answer. Insert your answer. Insert your answer.
2
Workbook Index
Wk
3
1
Wk 3 – Set 1, Part 2
Wk 3 – Set 2, Part 1
Wk 3 – Set 2, Part 2
Wk 3 – Set 2, Part 3
Complete the following
7
Financial
Problem
Present value formula:
PV = FV * 1 / (1+i)^n
Future value formula:
FV = PV * (1+i)^n
Question
Answer
1. If you want to have $
6
0
Insert your answer.
2. What will $110,000 grow to be in 9 years if it is invested today at 11%?
3. You would like to have $200,000 in a college fund in 1
5
4
5. What will $82,000 grow to be in 11 years if it is invested today at 8% and the interest rate is compounded monthly?
6. How many years will it take for $136,000 to grow to $4
68,000
7. At what interest rate must $112,000 be invested so that it will be worth $392,000 in 14 years?
HCS/385 v4
Page &P of &N
Complete the following 6 Wk 3 Financial Exercises: Problem Set 1, Part 2 problems:
1. Calculate the net present value (NPV) of the following cash flow stream if the required rate is 12%:
Insert your NPV calculation.
Year
Cash Flow
(230,000)
60,000
Is this a good project for the business to accept? Explain why or why not.
2. Calculate the NPV of the following cash flow projections based on a required rate of 10.5%:
Year 0 1 2 3 4
Cash Flow
(120,000)
35,000
47,500
55,000
62,000
Insert your answer.
3. A company needs to decide if it will move forward with 2 new products that it is evaluating. The 2 initiatives have the following cash flow projections:
Project A
Cash Flow
-800,000
220,000
265,000
292,000
317,000
Project B
Cash Flow
-650,000
175,000
Based on the risk of each project, the company has a required rate of return of 11% for Project A and 11.5% for Project B. The company has a $1.5 million budget to spend on new projects for the year. Should the company move forward with one, both, or neither of the two new products? Show your work to support your answer.
4. Calculate the internal rate of return (IRR) of the following cash flows:
Year 0 1 2 3 4 5 6 7
Cash Flow
(1,650,000)
330,000
365,000
380,000
415,000
405,000
370000
294,000
5. If a company has a required rate of return of 15%, should the following project be accepted based on these expected cash flows below?
Year 0 1 2 3 4 5 6
Cash Flow
(274,000)
73,000
76,500
78,000
82,500
77,000
Explain why or why not the company should move forward with this endeavor.
6. Based on the investor expectations of earning at least 12%, should this projected below be completed?
Cash Flow
(133,000)
37,000
42,750
44,000
46,500
Insert your answer.
HCS/385 v4
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&”Arial,Regular”&8Copyright© 2020 by University of Phoenix. All rights reserved.
&”Arial,Regular”&8Copyright© 2020 by University of Phoenix. All rights reserved.
Describe the 5 types of budgets listed for these Wk 3 Financial Exercises: Problem Set 2, Part 1. In your descriptions, include the budget’s objective, how the budget assists an organization in managing its financial activities, and what types of data need to be included in that specific budget.
Type of Budget
Description
Cash Flow
Insert cash flow description.
Operating
Insert operating description.
Sales
Insert sales description.
Static
Insert static description.
Financial
Insert financial description.
Complete the following 3 Wk 3 Financial Exercises: Problem Set 2, Part 2 problems using the following ratios:
Sales level at which operating income is zero
o If sales above breakeven, then profit
o If sales below breakeven, then loss
o Fixed expenses = total contribution margin
Total sales = total expenses
Break Even Point: Unit Sold = Fixed expenses + Operating Income / Contribution Margin per unit
Break Even Point: Sales $ = Fixed expenses + Operating Income / Contribution Margin Ratio
Problem Answer
1. Calculate the break even number of units if the fixed expenses are $7,000 and the contribution margin is $14 per unit.
2. Calculate the break even sales dollars if the fixed expenses are $7,000 and the contribution ratio is 40%.
3. Calculate the break even number of units with a target profit of $120,000 if the fixed expenses are $15,000 and the contribution margin is $60 per unit.
Complete the following 5 Wk 3 Financial Exercises: Problem Set 2, Part 3 problems:
1. How much will you have saved after 6 years by contributing $1,200 at the end of each year if you expect to earn 11% on the investment?
2. A business owner plans to deposit their annual profits in an investment account earning a 9% annual return. If the owner starts with their first deposit today for $22,000 and expects to make the same profit for the next 7 years, how much will be saved for retirement at that point?
3. An investor plans to invest $500 a year and expects to get a 10.5% return. If the investor makes these contributions at the end of the next 20 years, what is the present value of this investment today?
4. What is the present value (PV) of a 12-year lease arrangement with an interest rate of 7.5% that requires annual payments of $4,250 per year with the first payment being due now?
5. A recent college graduate hopes to have $200,000 saved in their retirement account 25 years from now by contributing $150 per month in a 401(k) plan. The goal is to earn 10% annually on the monthly contribution. Will they have the $200,000 at the end of the 25 years?