In: Finance
Solve the problems described below, and present your solutions
in the Excel template provided; no memo is required with this
assignment. Also, the excel spreadsheet specifies monthly billable
hour data. Set March, 2013, as month zero. Ignore taxes. The due
date is SATURDAY at 11:55 PM Eastern. No late work is
accepted.
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% or Unit | Start | End | |||
Price | 3 Year | 2013 | 2014 | 2015 | |
($ / Hr) | Total | Sub-Tot | Sub-Tot | Sub-Tot | |
Data For Both Track Hoes | |||||
Billable Hours of Operation | 3600 | 1200 | 1200 | 1200 | |
MARR and Monthly Discount Factors | |||||
Annual effective rate | 12.5% | ||||
Monthly effective rate | |||||
Monthly discount factors | |||||
Track Hoe #1 | |||||
Capital Values | |||||
Track Hoe Investment | $100,000 | ||||
Track Hoe Salvage | $35,000 | ||||
Revenues | |||||
Track Hoe Operation | $95.00 | ||||
Costs | |||||
Track Hoe Operation | $31.00 | ||||
Operator | $29.00 | ||||
Total Costs | |||||
NCF | |||||
Cumulative Cash | |||||
Present Values | |||||
PVs of Monthly NCFs | |||||
Project Net -- NPV | |||||
IRR | |||||
Track Hoe #2 | |||||
Capital Values | |||||
Track Hoe Investment | $65,000 | ||||
Track Hoe Salvage | $0 | ||||
Revenues | |||||
Track Hoe Operation | $95.00 | ||||
Costs | |||||
Track Hoe Operation | $36.00 | ||||
Operator | $29.00 | ||||
Total Costs | |||||
NCF | |||||
Cumulative Cash | |||||
Present Values | |||||
PVs of Monthly NCFs | |||||
Project Net -- NPV | |||||
IRR | |||||
Requested Valuation Methods | |||||
1. Net Present Value | |||||
TH1 | TH2 | ||||
2. Future Value | |||||
TH1 | TH2 | ||||
3. Monthly Rate of Return or Internal Rate of Return (IRR) | |||||
TH1 | TH2 | ||||
4. Payback without interest (number of months) | |||||
TH1 | TH2 | ||||
5. Payback with interest (number of months) | |||||
TH1 | TH2 | ||||
Final recommendation | |||||
TH1 or TH2? | |||||
Financial Comparison of Track Hoe #1 with Track Hoe #2 | |||||
% or Unit | Start | End | |||
Price | 3 Year | 2013 | 2014 | 2015 | |
($ / Hr) | Total | Sub-Tot | Sub-Tot | Sub-Tot | |
Data For Both Track Hoes | |||||
Billable Hours of Operation | 3600 | 1200 | 1200 | 1200 | |
MARR and Monthly Discount Factors | |||||
Annual effective rate | 12.50% | ||||
Monthly effective rate | 1.04% | ||||
Monthly discount factors | 0.99 | ||||
Track Hoe #1 | |||||
Capital Values | |||||
Track Hoe Investment | $100,000 | $100,000 | |||
Track Hoe Salvage | $35,000 | $35,000 | |||
Revenues | |||||
Track Hoe Operation | $95.00 | $342,000.00 | $114,000.00 | $114,000.00 | $114,000.00 |
Costs | |||||
Track Hoe Operation | $31.00 | $111,600.00 | $37,200.00 | $37,200.00 | $37,200.00 |
Operator | $29.00 | $104,400.00 | $34,800.00 | $34,800.00 | $34,800.00 |
Total Costs | $60.00 | $216,000.00 | $72,000.00 | $72,000.00 | $72,000.00 |
NCF | $35.00 | $126,000.00 | $42,000.00 | $42,000.00 | $42,000.00 |
Cumulative Cash | |||||
Present Values | |||||
PVs of Monthly NCFs | $34.64 | $100,016.46 | $37,333.33 | $33,185.19 | $29,497.94 |
Project Net -- NPV | $24,598.08 | ||||
IRR | |||||
PV | $1,571.78 | ||||
PV | $0.000000 | ||||
PV | ($96.00) | ||||
IRR | 24.942% | ||||
Track Hoe #2 | |||||
Capital Values | |||||
Track Hoe Investment | $65,000 | ||||
Track Hoe Salvage | $0 | ||||
Revenues | |||||
Track Hoe Operation | $95.00 | $342,000.00 | $114,000.00 | $114,000.00 | $114,000.00 |
Costs | |||||
Track Hoe Operation | $36.00 | $129,600.00 | $43,200.00 | $43,200.00 | $43,200.00 |
Operator | $29.00 | $104,400.00 | $34,800.00 | $34,800.00 | $34,800.00 |
Total Costs | $65.00 | $234,000.00 | $78,000.00 | $78,000.00 | $78,000.00 |
NCF | $30.00 | $108,000.00 | $36,000.00 | $36,000.00 | $36,000.00 |
Cumulative Cash | |||||
Present Values | |||||
PVs of Monthly NCFs | $29.69 | $85,728.40 | $32,000.00 | $28,444.44 | $25,283.95 |
Project Net -- NPV | $20,728.40 | ||||
IRR | |||||
PV | $380.06 | ||||
PV | ($0.0000) | ||||
PV | ($527.70) | ||||
IRR | 30.416% | ||||
Requested Valuation Methods | |||||
1. Net Present Value | |||||
TH1 | TH2 | ||||
$24,598.08 | $20,728.40 | ||||
2. Future Value | |||||
TH1 | TH2 | ||||
3. Monthly Rate of Return or Internal Rate of Return (IRR) | |||||
TH1 | TH2 | ||||
24.94% | 30.42% | ||||
4. Payback without interest (number of months) | |||||
TH1 | TH2 | ||||
5. Payback with interest (number of months) | |||||
TH1 | TH2 | ||||
Final recommendation | |||||
TH1 or TH2? | TH2 | Because IRR is more | |||