## Answers

Using excel formula

Year | 0.00 | 1 | 2 | 3 | 4 | 5 |

Project A | -220000 | 60000 | 70000 | 85000 | 70000 | 50000 |

Cumulative Cash flow | -220000.00 | -$160,000.00 | -$90,000.00 | -$5,000.00 | $65,000.00 | $115,000.00 |

Payback Period | 3.07 | |||||

excel formula | (3+5000/7000) |

Year | 0.00 | 1 | 2 | 3 | 4 | 5 |

Project A | -220000 | 60000 | 70000 | 85000 | 70000 | 50000 |

Discounted Cash Flow | -220000.00 | 55045.87 | 58917.60 | 65635.60 | 49589.76 | 32496.57 |

Cumulative Cash flow | -220000.00 | -$164,954.13 | -$106,036.53 | -$40,400.93 | $9,188.83 | $41,685.40 |

Discounted Payback Period | 3.81 | |||||

excel formula | 3+40400.93/49589.76 |

USing excel to calculate NPV and PI

A | |||

Project A | |||

1 | Year | Cash Flow | |

2 | 0 | -220000 | |

3 | 1 | 60000 | |

4 | 2 | 70000 | |

5 | 3 | 85000 | |

6 | 4 | 70000 | |

7 | 5 | 50000 | |

NPV | $261,686.40 | ||

Excel formula | NPV(9%,A3:A7)+A2 | ||

PI | $2.19 | ||

Excel formula | (1+261686.50/220000) |

Since NPV is positive project should be accepted

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