# Fin 100 Assignmnet NPV IRR MIRR For Mac And PC Excel Business And Finance Homework Help

### Question Description

PLEASE NOTE THE UNDERLINE. PER MY PROFESSOR,

There are three (3) types of textbook based homework items located at the endof each chapter. These include Discussion Questions (DQ), Exercises (E), andProblems (P). Some homework items have been custom created.

Complete the following homework scenario:

• Required:
Compare the results of the three (3) methods by quality ofinformation for decision making. Using what you have learned about the three (3)methods, identify the best project by the criteria of long term increase invalue. (You do not need to do further research.) Convey your understanding ofthe Time Value of Money principles used or not used in the three (3) methods.Review the video titled “NPV, IRR, MIRR for Mac and PC Excel” (located at and previouslylisted in Week 4) to help you understand the foundational concepts:

Scenario Information:
Assume that two gas stations are for sale withthe following cash flows; CF1 is the Cash Flow in the first year, and CF2 is theCash Flow in the second year. This is the time line and data used in calculatingthe Payback Period, Net Present Value, and Internal Rate of Return. Thecalculations are done for you. Your task is to select the best project andexplain your decision. The methods are presented and the decision each indicatesis given below.

 Investment Sales Price CF1 CF2 Gas Station A \$50,000 \$100,000 Gas Station B \$50,000 \$50,000 \$25,000

Three (3) Capital Budgeting Methodsare presented:

1. Payback Period: Gas Station A is paid back in 2 years; CF1in year 1, and CF2 in year 2. Gas Station B is paid back in one (1) year.According to the payback period, when given the choice between two mutuallyexclusive projects, the investment paid back in the shortest time isselected.
2. Net Present Value: Consider the gas station example aboveunder the NPV method, and a discount rate of 10%:
NPVgas station A= \$100,000/(1+.10)2 – \$50,000 =\$32,644
NPVgas station B = \$50,000/(1+.10) +\$25,000/(1+.10)2 – \$50,000 = \$16,115
3. Internal Rate of Return: Assuming 10% is the cost of funds;the IRR for Station A is 41.421%.; for Station B,36.602.

Summary of the Three (3) Methods:

• Gas Station B should be selected, as the investment is returned in 1 periodrather than 2 periods required for Gas Station A.
• Under the NPV criteria, however, the decision favors gas station A, as ithas the higher net present value. NPV is a measure of the value of theinvestment.
• The IRR method favors Gas Station A. as it has a higher return, exceedingthe cost of funds (10%) by the highest return