Question

Question 1 (6pts). For the cash flows shown below, answer the following questions. (Assume MARR = 12%) (1) (2pts) Provide the equation using PW to find the ROR of the cash flow given. (2) (2pts) Decide whether the project is acceptable or not using RATE function in MS Excel. Provide the screenshot (3) (2pts) Decide whether the project is acceptable or not using IRR function in MS Excel. Provide the screenshot

Year	Factor	Amounts
0	Investment ($)	1,200,000
1-10	Revenue ($ per year)	300,000
1-10	M&O cost ($ per year)	100,000
10	Salvage ($)	400,000

Answer 1

Cash Flow for each year from 1 to 10 year = $ 200,000

(Revenue minus M & O Cost for every year)

Calculation of Net present value of the given project. Please refer the below table.

Year & Type of Cash flow	Cashflow Inflow / -Outflow	Discount Factor @ 12%	Discounted Cash Flow
Initial Investment	-$12,00,000	1.0000	-$12,00,000
1	$2,00,000	0.8800	$1,76,000
2	$2,00,000	0.7744	$1,54,880
3	$2,00,000	0.6815	$1,36,294
4	$2,00,000	0.5997	$1,19,939
5	$2,00,000	0.5277	$1,05,546
6	$2,00,000	0.4644	$92,881
7	$2,00,000	0.4087	$81,735
8	$2,00,000	0.3596	$71,927
9	$2,00,000	0.3165	$63,296
10	$2,00,000	0.2785	$55,700
Salvage realisation	$4,00,000	0.2785	$1,11,400
Net Present Value			-$30,401

Since net present value is negative (-$ 30401), the project should not be accepted.