#### Question Details

(solution) UNIT 3: TEXTBOOK PROBLEMS CHAPTER 7: PROBLEM 1b Discount

I like to get help with the following questions, see the attached for the questions and for question #8 see the additional notes below.

For Chapter 8, P.1 (Step 1), You will have to multiply a few of the given inputs on the spreadsheet to come up with some of the formula inputs from the text. For the Sales (first part of the formula), you need to multiply Cell B60 (# of Souffles produced per year) by B62 (Price of each Souffle) to derive the Sales. The Sales is not given in its entirety in the problem. You need to do this as well to derive the Costs and Depreciation.

For Step 2, each cell will just be the answer that you get in Step 1.

UNIT 3: TEXTBOOK PROBLEMS

CHAPTER 7: PROBLEM 1b Discount Rate

Year 0

Year 1

Year 2

Year 3

NPV = Project A

15%

($14,500)

$8,500

$6,800

$2,800 Project B

15%

($9,800)

$4,700

$4,200

$4,100 (Note: You will choose the project that has the highest NPV since it creates the most w CHAPTER 7: PROBLEM 2

Year

0

1

2

3

4

5

6

7

8

Payback Period = A.

$3,200

$825

$825

$825

$825

$825

$825

$825

$825 B.

$4,600

$825

$825

$825

$825

$825

$825

$825

$825 Year

0

1

2

3

IRR = Project A

($5,200)

1,800

3,200

2,200 Project B

($3,600)

1,300

2,100

1,800 Discount Rate

Year

0 (Initial Cost)

1

2

3

4

5

6

7 C.

$7,900

$825

$825

$825

$825

$825

$825

$825

$825 15% CHAPTER 7: PROBLEM 8 CHAPTER 7: PROBLEM 9 ($185,000)

62,000

62,000

62,000

62,000

62,000

62,000

62,000 First find the NPV

Now calculate the Profitability Index $185,000 (Use the built-in NPV formula in Excel but exclude using the Year 0 cash outflow.)

(Use the positive amount of the initial cost in cell C44 in the formula. You would only accept the pro CHAPTER 8: PROBLEM 1

Cost of Souffle Maker

Economic Life

# of Souffles produced per year

Cost to make each Souffle

Price of each Souffle

Discount Rate

Tax Rate $27,000

6

2,300

$2

$7

14%

34% ($27,000)

years Step 1: First calculate the Operating Cash Flow.

Step 2: Place the answer you get for your Operating Cash Flow in the year 1 thru year 6 cells below.

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Step 3: Now find the NPV. Be sure to include the initial cost by using cell C58 as it is negative.

NPV =

(You will accept the project if the NPV is positive.) he most wealth.) ept the project if the Profitability Index is above 1.)

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