Capital Budgeting NPV Analysis of Mutually Indepen Years

Document Sample
Capital Budgeting NPV Analysis of Mutually Indepen Years Powered By Docstoc
					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 
				
DOCUMENT INFO
Description: This file may used for comparing mutually independent options (may be projects, investment plans, etc.). Net Present Value and Incremental Internal Rate of Return analysis are carried out for elimination and selection process. Net Present Value analysis eliminates options with negative net present values. Then, the options are sorted by their NPVs. The option with the largest NPV is selected as the best option according to NPV analysis. Then, in another sheet Incremental Internal Rate of Return analysis is carried out. The user defines a MARR (minimum acceptable rate of return). The options with negative NPV and NPV lower than MARR are eliminated. Remaining options are compared one by one. At each step an option is eliminated. The steps of the algorithm are displayed on a bar chart. Winner of the final comparison is determined as the best option according to Incremental IRR analysis. On another sheet, process of the Incremental IRR analysis used in this template is described.
BUY THIS DOCUMENT NOW PRICE: $12.99 100% MONEY BACK GUARANTEED
PARTNER SpreadsheetZone
SpreadsheetZONE features one of the biggest Microsoft Excel template repositories on the web. Supported by an active community and Excel Pros SpreadsheetZONE grows rapidly, delivering new templates everyday. Find the template you need now!