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Cowboy Corp. is about to expand its operations and they have several projects with various cash...

Cowboy Corp. is about to expand its operations and they have several projects with various cash flows available in Excel upload file. Each project has an 8-year life and the firm has a cost of capital at 8%. The firm has $15,000 for the expansion and will invest in multiple projects with that capital constraint.

1. Calculate NPV for each project

2. Find the project combination that maximizes total NPV for Cowboy Corp. and calculate total capital spending

3. Find the optimum combination under following constraints; Project A and C can only be invested together and at least one out of Project E, F or G must be invested.

Cost of capital 8%
YEAR 0 1 2 3 4 5 6 7 8
Project A -5000 1000 1250 1000 900 850 750 700 700
Project B -3000 400 600 800 600 600 600 600 600
Project C -4500 1200 1500 1200 1200 500 500 300 300
Project D -2000 450 450 450 400 400 300 300 200
Project E -7500 1350 1350 1350 1350 1350 1350 1350 1350
Project F -8000 2000 2000 2000 1500 1500 1500 500 100
Project G -6500 1400 1400 1200 1200 900 900 900 900

Solutions

Expert Solution

Solution.>

Since it is a 8-year project, the values of year 7 and year 8 is missing in the question. So i have solved it till the year 6. The answer would be different if we include the year 7 and 8, but the methodology will remain the same. I have solved this question in Excel. The formula used are written along with the values. If you still have any doubt, kindly ask in the comment section.

Note: Give it a thumbs up if it helps! Thanks in advance!

jeff jeffy answered 2 years ago
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