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Calculating the NPV for each of the given projects

Use MS Excel for your calculations.

The following is a list of four projects that Capital Corporation must choose from for the coming year:

Project Project Price Annual Net In?ows
A 700,000 118,861
B 670,000 109,039
C 184,000 32,549
D 273,000 48,305

(a) Given a uniform rate of interest of 9% and a uniform life of the projects of 10 years each, calculate the NPVs of each Project.

(b) Should we choose Projects A, C, D or Projects A, B, D. Explain

Solution Preview

Please refer attached file for better clarity of functions in MS Excel.

Project A
Cost of project=Co=$700,000
Annual inflows=PMT=-$118,861
No. of periods=NPER=10
Rate of interest=RATE=9%
Type of payment=TYPE=0 assume year end cash flows
Future Value=FV=0

We can use PV function in MS Excel to get PV of cash inflows..

PV of cash inflows=PV=$762,809.21 =PV(C29,C28,C27,C31,C30)

NPV =-Co+PV=$62,809.21

Project B
Cost of ...

Solution Summary

Solution describes the steps to calculate NPV for the given projects. Calculations are carried out the with the help of functions in MS Excel.