Please create an excel spreadsheet worksheet of this problem (answering ALL Part

Question

Please create an excel spreadsheet worksheet of this problem (answering ALL Parts a - d). The NPV car example is also below.

The following is the GIVEN Sheet 1, 2, and 3 of the NPV car example.

Sheet 1:Original Model

Sheet 2: Direct dep of Price Growth

Sheet 3: all pre Year 1 bT Profit

I am aware all three of these charts have the same data but I am not sure why that is the case either. But, this is the data I was given.

Thanks for any help!

1. In the car NPV example, determine the following: a. The direct dependents and all the dependents of the interest rate b. The direct dependents and all the dependents of the c. The direct precedents and all the precedents for Year d. The direct precedents and all the precedents for Year tax rate. 4 unit sales. 3 costs

Explanation / Answer

Introduction :- The above problem is related to Capital Budgeting where we calculate cash Flow After Tax and Before tax through various methods:-

1. Internal Rate of Return

2. Net Present Value

The NPV can be calculated on the basis of sales and on the basis of direct cashflows.

A. Generally the relationship between interest rate and NPV is if interest rate rises WACC will also rise. It depends on which method you use for calculating NPV.As interest rate rises ,discount rate will also rise thereby reducing the NPV of corporate projects. And the project can have a positive or negative NPV.

In the above example ,the dependents of interest rate are Revenues, Costs ,Cost growth and Price growth. Because some car dealers provide financing for the customer on the car i.e. in the form of EMI, Mortgage etc. And price is dependent on risk and value. So Profit , Revenue and Variable Costs will depend on the Price charged and Unit Cost.

In the above excel sheet the depedents can be identified by cells

B. The Major dependent of Tax rate is Revenue. And the other dependents of tax are Sales and Price.

Higher the sales , Higher the revenue and Tax amount to be paid is very high. And tax depends on size of the organization whether its Small or medium or large. Tax varies from year to year because its dependent on sales and revenue. And other depedents are cost growth and price growth.

C. The precedents of Year 4 Unit Sales are as below:- Year 4 Unit Price and Year 4 Unit Cost and No of Units manufactured.

D. The Precedents of Year 3 Unit Cost is as below :- Year 3 Unit Price, Cost Growth and Price Growth.

Revenues Cell B13 to F13 Costs Cell B14 to F14

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