Use excel functions for all answers and show your work. Thank you. Fangled Produ

Question

Use excel functions for all answers and show your work. Thank you.

Fangled Products, LLC is considering the introduction of new product lines. Fangled uses a MARR of 10%. a Product "Whiz" would require an investment of $400,000. It is forecasted to have positive cash flows of $150,000 in years 1-5, and have a positive salvage value of $75,000 at the end of year 5. What would be the present worth and internal rate of return of this investment? Should it be approved? b Product "Bang" would require an investment of $300,000. It is forecasted to have the annual cash flows in years 1-5 as shown below. In addition to these cash flows, a salvage value in year 5 of $40,000 is expected. What would be the present worth and internal rate of return of this investment? Should it be approved? Year 1 2 3 4 5 Cash Flow $50,000 $75,000 $100,000 $75,000 $50,000 Solution

Explanation / Answer

IRR Project A

Particulars Year PVF @ 10% Cash Flow A Cash Flow B PV A @ 10% PV B @ 10% Cash Flows 0 1 -400000 -300000 -4,00,000.00 -3,00,000.00 Cash Flows 1 0.90909091 150000 50000    1,36,363.64        45,454.55 Cash Flows 2 0.82644628 150000 75000    1,23,966.94        61,983.47 Cash Flows 3 0.7513148 150000 100000    1,12,697.22        75,131.48 Cash Flows 4 0.68301346 150000 75000    1,02,452.02        51,226.01 Cash Flows 5 0.62092132 150000 50000        93,138.20        31,046.07 Salvage Value 5 0.62092132 75000 40000        46,569.10        24,836.85 Net Present Value    2,15,187.11      -10,321.58

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