Please answer solution on an excel sheet (showing formulas) for full credit. Onl

Question

Please answer solution on an excel sheet (showing formulas) for full credit. Only answer if you are 100% certain.

Alfred has been advised that on each pay day he should pay himself first by depositing some part of his paycheck in a fund before spending any of the paycheck. He has resolved to invest 280 a month into a savings fund. To simplify calculations, consider each month as having exactly 28 days per year (52*7). How much will alfred accumulate in 40 years for each of the following investment alternatives? a Deposit 280 once a month into a fund with an APR of 3.02% with interest compounded monthly (13 times per year) b Deposit 70 once a week into a fund with an APR of 2.67% with interest compounded weekly (52 times per year) c Deposit 70 once a week into a fund with an APR of 2.66% with interest compounded Daily (364 times per year)

Explanation / Answer

a)Cash flow = EBIT*(1-tax) + Depreciation

b)NPV of the project = -65000 + 20500.15/1.15 + 22450.24/1.15^2 + 20370.14/1.15^3+ 19122.09/1.15^4 + 19122.09/1.15^5 + 18186.04/1.15^6=$11,498.02

NPV is positive and therefore machine should be purchased

Year 0 1 2 3 4 5 6 Initial cost -65000 Revenue 35000 35000 35000 35000 35000 35000 Operating costs -12000 -12000 -12000 -12000 -12000 -12000 Depreciation % 20% 32% 19.20% 11.52% 11.52% 5.76% Depreciation -13000 -20800 -12480 -7488 -7488 -3744 EBIT 10000.2 2200.32 10520.19 15512.12 15512.12 19256.06 Net Income 7500.15 1650.24 7890.144 11634.09 11634.09 14442.04 Free Cash flows -65000 20500.15 22450.24 20370.14 19122.09 19122.09 18186.04

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