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FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please answer this and kindly show the solution using microsoft excel or google sheets.I'll give you a like. Thank you!

3. Using a spreadsheet generate your own set of Discount and Annuity Tables for, say, all discount rates between 1% and 20% (at 1 percentage point intervals) and for time periods 1 to 30 (at one time period intervals), as well as time periods 50 and 100. You should generate these tables by inserting the numbers for the time periods in the first column of each row and the discount rates in the first row of each column, and then inserting the appropriate formula into one cell of the table - year 1 at 1% - and then copying it to all other cells in the matrix. (Hint: Do not forget to anchor the references to periods and discount rates using the "$" symbol.) Answer: Write the discount formula into spreadsheet as shown below and then copy across 20 columns (headed 1% through 20%) and down 50 rows (headed 1 to 50). Column B Row 2 1% 2% 3% =1/(1+B$2)^$A2 0.980 0.971 0.980 0.961 0.943 0.971 0.942 0.915 1 2 3
Transcribed Image Text:3. Using a spreadsheet generate your own set of Discount and Annuity Tables for, say, all discount rates between 1% and 20% (at 1 percentage point intervals) and for time periods 1 to 30 (at one time period intervals), as well as time periods 50 and 100. You should generate these tables by inserting the numbers for the time periods in the first column of each row and the discount rates in the first row of each column, and then inserting the appropriate formula into one cell of the table - year 1 at 1% - and then copying it to all other cells in the matrix. (Hint: Do not forget to anchor the references to periods and discount rates using the "$" symbol.) Answer: Write the discount formula into spreadsheet as shown below and then copy across 20 columns (headed 1% through 20%) and down 50 rows (headed 1 to 50). Column B Row 2 1% 2% 3% =1/(1+B$2)^$A2 0.980 0.971 0.980 0.961 0.943 0.971 0.942 0.915 1 2 3
4. A firm has a capital budget of $100 which must be spent on one of two projects, each requiring a present outlay of $100. Project A yields a return of $120 after one year, whereas Project B yields $201.14 after 5 years. Calculate: (i) the NPV of each project using a discount rate of 10%; (ii) the IRR of each project. What are the project rankings on the basis of these two investment decision rules? Suppose that you are told that the firm's reinvestment rate is 12%, which project should the firm choose? Answer: (i)NPV(A) = 9.09; NPV(B) = 24.89, B>A (ii) IRR(A) = 20%; IRR(B) = 15%, A>B Using a reinvestment rate of 12% the terminal values are TV(A) = 188.82; TV(B) = 201.14, hence B>A. Alternatively calculate the IRR of (B-A): IRR(B-A) = 13.78% > 12%, hence undertake the “extra project” (B-A) ie. undertake B.
Transcribed Image Text:4. A firm has a capital budget of $100 which must be spent on one of two projects, each requiring a present outlay of $100. Project A yields a return of $120 after one year, whereas Project B yields $201.14 after 5 years. Calculate: (i) the NPV of each project using a discount rate of 10%; (ii) the IRR of each project. What are the project rankings on the basis of these two investment decision rules? Suppose that you are told that the firm's reinvestment rate is 12%, which project should the firm choose? Answer: (i)NPV(A) = 9.09; NPV(B) = 24.89, B>A (ii) IRR(A) = 20%; IRR(B) = 15%, A>B Using a reinvestment rate of 12% the terminal values are TV(A) = 188.82; TV(B) = 201.14, hence B>A. Alternatively calculate the IRR of (B-A): IRR(B-A) = 13.78% > 12%, hence undertake the “extra project” (B-A) ie. undertake B.
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