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# Excel Tools and Net Present Value

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34. As a bank loan officer, you want to reference detailed columnar loan portfolio data with a list of past-due loans. Which of the following is the most effective tool for doing so?
a. Pivot table
b. H Lookup
c. Search function
d. Scatter plot
e. V Lookup

35. Suppose that you are approached with an offer to purchase an investment that will provide cash flows of \$1,200 per year for 15 years. The cost of purchasing this investment is \$9,800. You have an alternative investment opportunity, of equal risk, that will yield 8% per year. What is the NPV that makes you indifferent between the two options?
a. \$10,271.37
b. \$436.46
c. \$1,197.30
d. \$471.37

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34. The H Lookup and V Lookup only produce results on a row-by-row or column-by-column basis ...

#### Solution Summary

This solution first discusses the various Excel tools available and then illustrates how to solve a net present value problem.

\$2.19

## You are considering two independent projects, Project A and Project B.

1) You are considering two independent projects, Project A and Project B. The initial cash outlay associated with project A is \$ 50,000, and the initial cash outlay associated with project B is \$ 70,000. The required rate of return on both projects is 12%. The expected annual free cash inflows from each project are as follows:

Project A Project B
Initial outlay - \$ 50,000 - \$ 70,000
Inflow year 1 12,000 13,000
Inflow year 2 12,000 13,000
Inflow year 3 12,000 13,000
Inflow year 4 12,000 13,000
Inflow year 5 12,000 13,000
Inflow year 6 12,000 13,000

Calulate the NPV, PI, and IRR for each project and indicate if the project should be accepted.

2)The State Spartan Corporation is considering two mutually exclusive projects. The free cash flows associated with those projects as follows:

Project A Project B
Initial Outlay - \$50,000 -\$50,000
Inflow year 1 15,625 0
Inflow year 2 15,625 0
Inflow year 3 15,625 0
Inflow year 4 15,625 0
Inflow year 5 15,625 0

The required rate of return on these projects is 10 percent.

A) What is each project's payback period?
B) What is each project's NPV?
C) What is each project's IRR?
D) What has caused the ranking conflict?
E) Which project should be accepted? Why?

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