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Capital Budgeting: Crunching the Numbers

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I would appreciate assistance with the attached problem (Miskell, p. 328, problem #6). I need assistance with completing the problem in Excel. Please show and explain formulas in Excel to help me get a better understanding to complete questions asked.

Reference:
Mikesell, J. L. (2010). Fiscal administration: Analysis and applications for the public
Sector (8th ed.: 2010 custom edition). Mason, OH: Cengage Learning.

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6. Two public infrastructure projects have the economic profiles that follow:

Option A Option B
Year Capital Cost ($) Operating & Maintenance Cost ($) Benefits ($) Capital Cost ($) Operating & Maintenance Cost ($) Benefits ($)

1 2,000,000 0 0 2,500,000 0 0
2 1,000,000 10,000 0 500,000 50,000 750,000
3 500,000 70,000 120,000 100,000 750,000
4 90,000 600,000 100,000 750,000
5 90,000 800,000 100,000 750,000
6 90,000 800,000 100,000 750,000
7 90,000 800,000 100,000 750,000
8 90,000 800,000 100,000 750,000
9 100,000 800,000 100,000 750,000
10 100,000 500,000 100,000 300,000

Read Exercise 6 at the end of Chapter 6, "Capital Budgeting, Time Value of Money, and Cost-Benefit Analysis: Process, Structure, and Basic Tools," and write a 3-4 page paper in which you:

1. Use Excel, to calculate each of the following: Show your work:

Discussions:
PAYBACK PERIOD
Payback period - this tool evaluates when the company's initial capital investment will be recouped from the investment's cash inflows. This can be computed by using the following table
Option A Option B
Year Capital Cost ($) Operating & Maintenance Cost ($) Benefits ($) Total cash flows Cash Flows Balance Capital Cost ($) Operating & Maintenance Cost ($) Benefits ($) Total cash flows Cash Flows ...

Solution Summary

This solution explains how to calculate payback value, net rate of return, and net present value using Excel.

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