Question
In: Economics
The independent project estimates below have been developed by the engineering and finance managers at Liberty Enterprises.
USE EXCEL TO SOLVE THE FOLLOWING:
The independent project estimates below have been developed by the engineering and finance managers at Liberty Enterprises. The corporate MARR is 8% per year, and the capital investment limit set by the CFO is $4 million. As a new employee in the Engineering Department, you have been asked to recommend the economically best projects. Set up the spreadsheet functions necessary to perform the analysis and answer the following questions.
| Project |
Initial Cost $ Millions |
Useful Life Years |
NCF $ per Year |
| 1 | -1.5 | 8 | 360,000 |
| 2 | -3.5 | 10 | 600,000 |
| 3 | -1.8 | 5 | 520,000 |
| 4 | -2.0 | 4 | 820,000 |
(a) Which project(s) are recommended (enter the project numbers, separated by commas):
(b) What is the total Capital Investment required for the recommended project(s)? (Answer in $M, rounded to one decimal place): $
(c) What is the expected total Present Worth stemming from the recommended project(s)? (Answer in $M, rounded to three decimal places): $
Solutions
Expert Solution
Solution:
(a) projects recommended are:
Based on above computations we should select project 4 & project 1 regarding the capital investment limit of $4 million.
(b)total Capital Investment required for the recommended project is:
selected project 4 & project 1 regarding the capital investment limit of $4 million.
Hence
capital investment required is $3.5 million
(c) expected total Present Worth stemming from the recommended project is:
PW of project 1 = $568.79
PW of project 4 = $715.94
Hence
the PW of recommended ie selected project is PW = $1284730 and invest $3.5 million
Normal calculation:
Excel calculation:
Rahul Sunny answered 2 years agoRelated Solutions
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