Rate of Return Analysis: You have $23,000 in a bank savings account today. You w
ID: 465775 • Letter: R
Question
Rate of Return Analysis: You have $23,000 in a bank savings account today. You wish to withdraw $3,400 per year for the next 25 years with the first withdrawal being one year from today. When you make the last withdrawal of $3,400 from your account 25 years from now the account will be empty and you will have withdrawn all your money. Compute the actual rate of return to within plus or minus 0.1% using Microsoft EXCEL.
Please show what it would look like in EXCEL.
Minimum Attractive Rate of Return: Use Present Worth analysis and determine which of the following two machines should be selected based on their incremental cash flows and a minimum attractive rate of return (MARR) of 11% per year. Compute the actual rate of return to within plus or minus 0.1% using Microsoft EXCEL.
Please show what it would look like in EXCEL.
Item Machine A Machine B First cost, $ -43,000 -65,000 Annual operating cost, $/year -14,500 -9,000 Salvage value, $ 10,500 17,000 Life, years 5 10Explanation / Answer
Year Cash flows PV Factor @ 14.21% PV of Cash flows 1 3400 0.875580072 2976.972244 2 3400 0.766640462 2606.577571 3 3400 0.671255111 2282.267377 4 3400 0.587737598 1998.307834 5 3400 0.514611328 1749.678517 6 3400 0.450583424 1531.983641 7 3400 0.394521867 1341.374347 8 3400 0.345435484 1174.480647 9 3400 0.302456426 1028.351849 10 3400 0.264824819 900.4043857 11 3400 0.231875334 788.3761367 12 3400 0.203025422 690.2864344 13 3400 0.177765013 604.4010458 14 3400 0.155647503 529.201511 15 3400 0.136281852 463.358297 16 3400 0.119325674 405.707291 17 3400 0.104479182 355.229219 18 3400 0.09147989 311.031625 19 3400 0.080097968 272.3330926 20 3400 0.070132185 238.4494288 21 3400 0.061406344 208.781568 22 3400 0.053766171 182.8049803 23 3400 0.047076588 160.0603977 24 3400 0.041219322 140.1456945 22940.56513 So Rate = 14.21% approximately
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