Places with xxxxx\'s are what needs to be filled in, and it\'s for excel so if I
ID: 2580180 • Letter: P
Question
Places with xxxxx's are what needs to be filled in, and it's for excel so if I could see the references to which numbers and the formula used that would be helpful. Thank you!!
Capital Budgeting Glacier Creek Textiles is planning to purchase new manufacturing equipment. The equipment has an acquisition cost of $100,000, an estimated useful life of five years and no residual value. The company uses a 12% rate of return to evaluate capital projects. The cash flows for the five years: Year Net Cash Outflows Net Cash Inflows Amount invested 0 ($100,000) 1 25,000 2 29,000 3 26,000 4 28,000 5 35,000 Requirements 1. Compute the accounting rate of return. 2. Compute the net present value of the investment using Excel's PV function. 3. Compute the net present value of the investment using Excel's NPV function. 4. Compute the profitability index, rounded to two decimal places. 5. Compute the internal rate of return of the investment using Excel's IRR function. Display to two decimal places, but do not round. Excel Skills 1. Function PV 2. Function NPV 3. Function IRRExplanation / Answer
1. Accounting Rate of Return
2. net present value of the investment using Excel's PV function.
3. net present value of the investment using Excel's NPV function
Working:
4. profitability index, rounded to two decimal places is as calculated below:
Investment Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Total Amount to be invested ($100,000) ($100,000) Cash Inflow 25,000 29,000 26,000 28,000 35,000 $143,000 Depreciation (100,000/5) -20,000 -20,000 -20,000 -20,000 -20,000 ($100,000) Accounting Income 5,000 9,000 6,000 8,000 15,000 $43,000 Average accounting Income (accounting Income/5) 8600 Average amount invested 100,000 ARR = Average accounting profit/ Average amount invested 8.6%