Air Scrubbers
Furnace Fuel Change
Initial Investment $ 1,350,000 $ 1,385,000
Annual Net Cash Flows $ 225,000 $ 315,000
Annual Net Income $ 135,000 $ 150,000
Project Life 15 years 15 years
Average Book Value $ 675,000 $ 692,500
Cost of Capital 6% 6%
>Part – Capital Budget
to calculate the IRR using the Excel =IRR formula.
IRR Worksheet Air Scrubbers 0000
using the Annuity Table to determine PV of cash flow
Net Present Value using the Annuity Table to determine PV of cash flow 1 )
Factor Amount 2 1 Initial investment 5,000)
1 3 years
225,000 50000.00
3, 44)
PV of Annual net cash flow for 15 years 4 Net present value 5 OR 6 Net Present Value Using Excel to determine PV cash flow 7 Present Value NPV = Initial Cost + PV of Cash Flow Present Value 8 Initial investment $ (1,350,000) Initial investment $ (1,385,000) 9 PV of Annual net cash flow for 15 years PV of Annual net cash flow for 15 years 225,000 Net present value Net present value 225,000 225,000 Payback Period = Initial Investment / Net Annual Cash Flow 13 225,000 15 Internal Rate of Return Using Annuity Table 9.71% OR OR IRR Worksheet Period 0 Average Rate of Return = Ave Net Income / Ave Book Value of investment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 21.52% © 2022 Walden University, LLC Page 1 of 1
Week 6 Assignment Data Air Scrubbers Furnace Fuel Change
Initial Investment $ 1,350,000 $ 1,385,000
Annual Net Cash Flows $ 225,000 $ 315,000
Annual Net Income $ 135,000 $ 150,000
Project Life 15 years 15 years
Average Book Value $ 675,000 $ 692,500
Cost of Capital 6% 6% Turnitin Report Formatting Title Page Citation Outline2
1
Instructions:
Your Instructor will provide the numerical data of the required investment, annual cash flows, annual net income, average book value, and cost of capital to students. Use that information to calculate the NPV, payback, IRR, and ARR by filling in the highlighted cells. Additionally, use the
IRR Worksheet
Air Scrubbers
Furnace Fuel Change
Period
Cash Flow
0
-1
3
5
Net
Present Value
225,000
NPV = Initial Cost + (Net Annual Cash Flow ×
Factor
Amount
Present Value NPV = Initial Cost + (Net Annual Cash Flow × Factor)
Factor
Present Value
225,000
Initial investment
$ (1,350,000)
$ (1,350,000)
$ (1,3
8
$ (1,385,000)
225,000
PV of Annual net cash flow for
15
–
13
(8
4
7
$
315,000
1.00
152,3
6
9
225,000
Net present value
$ (2,193,744)
$ 1,232,631
225,000
OR
225,000
Net Present Value Using Excel to determine PV cash flow
225,000
NPV = Initial Cost + PV of Cash Flow
225,000
225,000
=PV(rate,value1,[value2])
375
=PV(rate,value1,[value2]) (3,059)
10
$ (1,349,625)
11
$ (1,388,059)
12
Payback Period = Initial Investment / Net Annual Cash Flow
225,000
14
-3603.1252129469
452.7092954861
225,000
14.01%
Internal Rate of Return
Using Annuity Table
9.71%
Furnance Fuel Change
Using Excel =IRR(M6:M21) use the IRR worksheet
14.10%
Using Excel =IRR(M26:M41) use the IRR worksheet
21.52%
Cash Flow
-1385000
Average Rate of Return = Ave Net Income / Ave Book Value of investment
315,000
315,000
0.2
0.216
315,000
315,000
315,000
315,000
315,000
315,000
315,000
315,000
315,000
315,000
315,000
315,000
315,000
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