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    Capital Expenditure - Monarch Corporation: Payback, IRR, NPV

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    Please see the attached file with 5 Problems on 1 spreadsheet for 1 company. Please solve and include instructions on how to solve.

    Required:
    A. Compute below the payback, IRR, and NPV. For NPV use the cost of capital as the discount rate. For part A assume the revenue is $200,000.
    B. Copy the worksheet and solutions for part a to the worksheet part B, and redo the computations for a revenue of $250,000
    C. Copy the worksheet and solutions for part a to the worksheet part C, and redo the computations for a revenue of $300,000. List the three NPVs and compute the expected NPV. Indicate whether monarch should do the project? If so why? If not why?
    D. Take the IRRs calculated for the three different levels of revenue and compute the mean (expected return, standard deviation, and coefficient of variation given the probabilities for the three different IRRs. Remember you can list the IRRS based on how often they will occur, 3, 5, or 2 times out of 10.
    F. Based on the results for part d, assume the discount rate to compute npv is based on the following:

    © BrainMass Inc. brainmass.com June 3, 2020, 9:42 pm ad1c9bdddf
    https://brainmass.com/business/capital-budgeting/capital-expenditure-monarch-corporation-payback-irr-npv-195627

    Attachments

    Solution Preview

    See the attached file for complete solution. The text here may not be copied exactly as some of the symbols / tables may not print. Thanks

    YEARS 0 1 2 3 4 5 6
    INITIAL INVESTMENT (NO INCOME TAX AFFECTS)
    COST OF THE EQUIPMENT NEEDED 194,000
    WORKING CAPITAL NEEDS 50,000
    TOTAL INITIAL INVESTMENT 244,000

    ANNUAL OPERATING RECEIPTS
    SALES 200,000 200,000 200,000 200,000 200,000 200,000
    LESS COST OF GOODS SOLD 60,000 ...

    Solution Summary

    A comprehensive problem on capital investment. The solutions include four complete spreadsheets. The students can learn how to find relevant data from the problem to build financial models in Excel for decision-making.

    $2.19

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