EXCEL SHEET Problems

Please solve the problems below using an excel sheet and the excel functions.

1) (15 pts) A firm is considering a project with an initial investment of $170,000 and required return of 12%. The following cash flows are expected over the 8year life span of the project:

Year

Cash flows

1

35,300

2

46,200

3

50,000

4

22,620

5

15,100

6

5,200

7

11,740

8

89,300

a)

Calculate the Net Present Value (NPV) of the project. Should the firm accept or reject the project based on the NPV criteria? b)

Calculate the Internal Rate of Return (IRR) of the project. Should the firm accept or reject the project based on the IRR criteria?

c)

Calculate the Profitability Index (PI) of the project. Should the firm accept or reject the project based on the PI criteria? 2)(10 pts) You are considering the following two mutually exclusive projects. Both projects will be depreciated using straightline depreciation to a zero book value over the life of the project.

Neither project has any salvage value. Required rate of return on Project A is 10% and on project B is 13%.

Project A

Project B

Year

CFs

Year

CFs

0

-75,000

0

-70,000

1

19,000

1

10,000

2

48,000

2

16,000

3

12,000

3

72,000

a)

Calculate the Net Present Value (NPV) of both projects. Which project should the firm choose based on the NPV criteria?

b)

Calculate the Internal Rate of Return (IRR) of both projects. Which project should the firm choose based on the IRR criteria? 3)(5 pts) The bonds issued by Stainless Tubs bear an 8 percent coupon, payable semiannually. The bonds mature in 11 years and have a $1,000 face value. Currently, the bonds sell for $952. What is the yield to maturity? 4)(5pts) Redesigned Computers has 6.5 percent coupon bonds outstanding with a maturity date of 8 years from now.