UNIT 3: TEXTBOOK PROBLEMS                                   CHAPTER 7: PROBLEM 1b                         Project A Project B       Discount Rate 15% 15%       Year 0 ($14,500) ($9,800)       Year 1 $8,500 $4,700       Year 2 $6,800 $4,200       Year 3 $2,800 $4,100       NPV =     (Note: You will choose the project that has the highest NPV since it creates the most wealth.)                         CHAPTER 7: PROBLEM 2                       Year A. B. C.     0 $3,200 $4,600 $7,900     1 $825 $825 $825     2 $825 $825 $825     3 $825 $825 $825     4 $825 $825 $825     5 $825 $825 $825     6 $825 $825 $825     7 $825 $825 $825     8 $825 $825 $825     Payback Period =                                   CHAPTER 7: PROBLEM 8                       Year Project A Project B       0 ($5,200) ($3,600)       1 1,800 1,300       2 3,200 2,100       3 2,200 1,800       IRR =                                   CHAPTER 7: PROBLEM 9                       Discount Rate 15%         Year           0 (Initial Cost) ($185,000) $185,000       1 62,000         2 62,000         3 62,000         4 62,000         5 62,000         6 62,000         7 62,000         First find the NPV   (Use the built-in NPV formula in Excel but exclude using the Year 0 cash outflow.) Now calculate the Profitability Index   (Use the positive amount of the initial cost in cell C44 in the formula. You would only accept the project if the Profitability Index is above 1.)                         CHAPTER 8: PROBLEM 1                       Cost of Souffle Maker $27,000 ($27,000)       Economic Life 6 years       # of Souffles produced per year 2,300         Cost to make each Souffle $2         Price of each Souffle $7         Discount Rate 14%         Tax Rate 34%                     Step 1: First calculate the Operating Cash Flow.                       Step 2: Place the answer you get for your Operating Cash Flow in the year 1 thru year 6 cells below.   Year 1           Year 2           Year 3           Year 4           Year 5           Year 6                       Step 3: Now find the NPV. Be sure to include the initial cost by using cell C58 as it is negative.     NPV =   (You will accept the project if the NPV is positive.)