Capital Budgeting NPV Analysis of Mutually Indepen Years by pagosspreadsheetzone

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									NPV Analysis of Mutually Indepen
Years of Return of Projects: (up to 20 years) MARR (Minimum Acceptable Rate of Return): Interest Rate: 8

Opt.5

Opt.4

10.00% 10.00%

Opt.3

Opt.2
Opt.1

-200

-100

Investment Options (order the options in the increasing order of Initial Investments
Option Number 0 1 2 3 4 5 Explanation Do Nothing Purchase Machine A Purchase Machine B Purchase Machine A&B Purchase Machine C Purchase Machine A&C Initial Investments 0 1000 1200 2000 2500 3300 Annual Return 0 250 330 500 600 900 Annual Disbursement 0 50 60 110 150 200

NPV Analysis of the Projects

The best option is Option 5 with the largest Net Present Value

Option 1
Year 0 1 2 3 4 5 6 7 8 8 PV Factor 100% 91% 83% 75% 68% 62% 56% 51% 47% 47% Net Cash PV of Cash Flow Flow -1,000 200 200 200 200 200 200 200 200 200 -1,000 182 165 150 137 124 113 103 93 93 Cum. Cash Flow -1,000 -818 -653 -503 -366 -242 -129 -26 67 160

Option 2
Net Cash PV of Cash Flow Flow -1,200 270 270 270 270 270 270 270 270 220 -1,200 245 223 203 184 168 152 139 126 103 Cum. Cash Flow -1,200 -955 -731 -529 -344 -176 -24 114 240 343 Net Cash Flow -2,000 390 390 390 390 390 390 390 390 420

Option 3

of Mutually Independent Projects

Net Present Value

100

0

100

200

300

400

500

600

ents
Annual Net Cash Scrap Value at Flow the end 0 0 200 200 270 220 390 420 450 0 700 200 NPV of the Projects 0 160 343 277 -99 528

The option can be taken The option can be taken The option can be taken This option should not be taken. The option can be taken

Option 3
PV of Cash Flow -2,000 355 322 293 266 242 220 200 182 196 Cum. Cash Flow -2,000 -1,645 -1,323 -1,030 -764 -522 -301 -101 81 277

Option 4
Net Cash PV of Cash Flow Flow -2,500 450 450 450 450 450 450 450 450 0 -2,500 409 372 338 307 279 254 231 210 0 Cum. Cash Flow -2,500 -2,091 -1,719 -1,381 -1,074 -794 -540 -309 -99 -99

Option 5
Net Cash PV of Cash Flow Flow -3,300 700 700 700 700 700 700 700 700 200 -3,300 636 579 526 478 435 395 359 327 93 Cum. Cash Flow -3,300 -2,664 -2,085 -1,559 -1,081 -646 -251 108 434 528

a 1 2 3 IRR 10 5 C 528 0 160 343 277 -99 528 Do Nothing Option 1 Option 2 Option 3 Option 4 Option 5

Opt.1 Opt.2 Opt.3 Opt.4 Opt.5

NPV 160 343 277 -99 528

Option 5 TRUE TRUE TRUE FALSE TRUE 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Calculatıons and C
number first second third fourth fifth 4 1 2 3 5 10 a <10 a >2 a >5

a >1 a >3

0.137044742 0.167390279 0.131513594 TRUE 1 14% TRUE TRUE TRUE TRUE TRUE 2 17%

0 0.140766703 0.313098215 0.125999743 0 1 2 3 TRUE FALSE TRUE TRUE TRUE FALSE 3 4 5 1and2 1and3 1and4 13% 9% 14% 31% 13% 5% TRUE FALSE TRUE TRUE TRUE FALSE TRUE TRUE TRUE TRUE TRUE TRUE

1and2 -1,000 200 200 200 200 200 200 200 200 200 0 0 0 0 0 0 0 0 0 0 0 -1,200 270 270 270 270 270 270 270 270 220 0 0 0 0 0 0 0 0 0 0 0 -2,000 390 390 390 390 390 390 390 390 420 0 0 0 0 0 0 0 0 0 0 0 -2,500 450 450 450 450 450 450 450 450 0 0 0 0 0 0 0 0 0 0 0 0 -3,300 700 700 700 700 700 700 700 700 200 0 0 0 0 0 0 0 0 0 0 0 -200 70 70 70 70 70 70 70 70 20 0 0 0 0 0 0 0 0 0 0 0

1and3 -1,000 190 190 190 190 190 190 190 190 220 0 0 0 0 0 0 0 0 0 0 0

1and4 -1,500 250 250 250 250 250 250 250 250 -200 0 0 0 0 0 0 0 0 0 0 0

Calculatıons and Chart Data

0.1425141 0 0 0 0.123941372 0 0 0 0.157106859 0 4 5 6 7 8 9 10 11 12 13 TRUE FALSE FALSE TRUE FALSE TRUE 1and5 2and3 2and4 2and5 3and4 3and5 14% #DIV/0! -2% 12% #DIV/0! 16% TRUE FALSE TRUE FALSE TRUE FALSE FALSE FALSE TRUE FALSE TRUE FALSE FALSE TRUE TRUE FALSE FALSE FALSE TRUE FALSE

1and5 -2,300 500 500 500 500 500 500 500 500 0 0 0 0 0 
								
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