I need further clarification on a question that was already answered. It was on

Question

I need further clarification on a question that was already answered. It was on Feb. 5, 2016 about the "Hampton Company". I need the Net Present Value and the Internal Rate of Return put into an Excel format with the following headings:

Part 4 Net Present Value Before Tax After Tax 11% PV Present Item Year Amount Tax % Amount Factor Value Cost of equipment 0 Cost of training 0 0 Annual cash savings 1-5 Tax savings due to depreciation 1-5 Disposal value 5 Net Present Value Part 5 Internal Rate of Return Excel function method to calculate IRR This function requires that you have only one cash flow per period (Period 0 through Period 5, for our example). This means that no annuity figures can be used. The chart for our example can be revised as follows. After Tax Item Year Amount Cost of machine and training 0 Year 1 inflow 1 Year 2 inflow 2 Year 3 inflow 3 Year 4 inflow 4 Year 5 inflow 5 The IRR function will require the range of cash flows, beginning with the initial cash outflow for the investment and progressing through each year of the project. You also have to include an initial guess for the possible IRR. The formula is: =IRR(values,guess) IRR Function IRR(f84..f89,.30) #NUM!

Explanation / Answer

IRR is something where the net present value become zero and therefore the Format for IRR is also similar because the IRR is nothing but trial and error method and with the help od interpolation we can find out the IRR

Step 1 cash flow format 1 2 3 4 Cost of equipment Cost of training Annual cost savings Tax savings depreciation Net cash flow Step 2 Year cashflow Present value@12% net present value 0 1 0 1                               0.893 0 2                               0.797 0 3                               0.712 0 4                               0.636 0 NPV 0

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