The goal of this assignment is to calculate the Net Present Value of project 1 and display the Hypothetical Project Cash Flow Table. The goal is to make an Excel spreadsheet easy to read and understand by those non-financial managers who are making the ultimate decisions. In a separate paragraph describe the project.
The formula I used to find the Discount Holding rate, is =POWER((1+D7),B7)-1
Project 2 – Gadget Manufacturing Rather than focusing the next five years on Widget manufacturing, the company could immediately begin manufacturing Gadgets. The prevailing interest rate is 5% per annum. This project requires a high initial investment of $150,000. Net Cash Flows are projected to be low in Years 1 and Years 2, as Gadgets will be new to the market. Year 1 Cash Flow is projected to be $5,000 and Year 2 Cash Flow is projected to be $7,000. Analysts project that the product will take off in Year 3 with projected Cash Flow of $50,000 and in Year 4 with Cash Flow of $100,000. In an effort to keep the company focused on “the next great thing” the recommendation is to sell the Gadget manufacturing division at the end of Year 5, with Net Cash Flows, after the sale of the division, at $15,000.