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Hello, what formula would I use to start solving f...

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Hello, what formula would I use to start solving for the questions below?: What formula should I use to find the Present Value? A firm is considering the adoption of a project that is expected to generate revenues for 10 years. These expected revenues (in dollars) are: Year 1: 200,000 Year 6: 270,000 Year 2: 250,000 Year 7: 255,000 Year 3: 300,000 Year 8: 240,000 Year 4: 300,000 Year 9: 150,000 Year 5: 280,000 Year 10: 75,000 The total cost of the project, that is to be paid immediately upon adoption, is $1.6 million. Use a spreadsheet to compute the Net Present Value of the project if: a. the firm?s cost of capital is 6 percent. Should the project be adopted? b. the firm?s cost of capital is 8 percent. Should the project be adopted? Suppose the firm has a second project that requires an initial outlay of $800,000 and is expected to generate revenues for only 5 years, and those revenues are of the same amounts as given above for years 1 to 5. Use the same spreadsheet to compute the Net Present Value of this project if: c. the firm?s cost of capital is 6 percent. Is this project one the firm would like to adopt? If these are the only two projects that the firm is contemplating, what should the firm so if: d. its capital budget is $1 million and its cost of capital is 6 percent? e. its capital budget is $3 million and its cost of capital is 6 percent: Year Net Cash Flow Present Value Year 1: 200,000 Year 2: 250,000 Year 3: 300,000

 

Paper#5565 | Written in 18-Jul-2015

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