Principles of Corporate Finance

Tenth Edition Instructions

Navigating the Workbook Entering your information Entering data Printing Help Navigating the Workbook
Each chapter of the spreadsheets to accompany Principles of Corporate Finance contains links to help you navigate the workbook. These hyperlinks help you move around the workbook quickly. The Main Menu contains links to each problem from the chapter that contains the Excel icon. From the Main Menu, click on the question you wish to complete. You can always return to the main menu by clicking on the link located in the upper right corner of each worksheet. You can move quickly around an Excel workbook by selecting the worksheet tab at the bottom of the screen. Each worksheet in an Excel workbook will have its own tab. In the spreadsheets to accompany Principles of Corporate Finance, you will see a separate tab for each problem, along with the Main Menu, Instructions and Help Topics worksheets. Another way to move quickly around an Excel workbook is by using the following keyboard shortcuts: CTRL+PAGE DOWN: Moves you to the next sheet in the workbook. CTRL+PAGE UP: Moves you to the previous sheet in the workbook.

Main Menu

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Entering your information

For each question, you will see the following lists and boxes: Student Name: Course Name: Student ID: Course Number: Enter your information in these cells before submitting your work.

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Entering data
To enter numbers or text for these questions, click the cell you want, type the data and press ENTER or TAB. Press ENTER to move down the column or TAB to move across the row. For cells or columns where you want to enter text, select Format, and then Cells from Excels main menu at the top of your screen. Select the Number tab and then Text from the category list.

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Printing
To print your work, select "File," and then "Print Preview" from Excels main menu at the top of your screen. The print area for each question has been set, but be sure to review the look of your print job. If you need to make any changes, select Setup when you are previewing the document.

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Help
There are two sources of help throughout these spreadsheet templates. First, you will find comments in specific cells (highlighted in red) providing tips to what formula or function is needed to complete the problem. Second, you will find links to Microsoft Office's online help page when an Excel Function is needed to complete the problem.

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Copyright 2011 McGraw-Hill/Irwin

Enter the values in blue colored cells.

Chapter 10 Question #11

Student Name: Course Name: Student ID: Course Number: Calculate the NPV under the new assumptions listed above. To undertake a sensitivity analysis of the electric scooter project, we set each variable in turn to its most pessimistic or optimistic value and recalculate the NPV of the project
Operating cash flow (yen bn) = net income + depreciation tax shield Pessimistic Expected Optimistic

Variable Market size, million Market share Unit price, yen Unit variable cost, yen Fixed cost, bns of yen

Pessimistic

Range Expected

Optimistic

Pessimistic

NPV (billions of yen) Expected Optimistic

0.8 0.04 300,000 350,000 5

1 0.1 375,000 300,000 3

1.2 0.16 400,000 275,000 1

What are the principal uncertainties in the project?

Copyright 2011 McGraw-Hill/Irwin

click here to begin typing Enter the values in blue colored cells.

Chapter 10 Question #13

Student Name: Course Name: Student ID: Course Number: Use Excel's PV function to find the Annuity Factor assuming a 12% discount rate (the PV of $1 for t years) Annuity Factor: Click here for help with Excel's PV function

Enter a formula under each case in the table below that calculates the Equivalent Annual Cost Savings (in millions) Equivalent Annual Cost Savings (Millions) Pessimistic Sales Manufacturing Cost Economic Life Expected Optimistic

Copyright 2011 McGraw-Hill/Irwin

Enter the values in blue colored cells.

Chapter 11 Question 10
Student Name: Course Name: Student ID: Course Number:

Assumptions Equipment cost (000s) Units (000s) Production Costs Initial Selling Price Real Cost of Capital Net Present Value Cash Flow t=0 Cash Flow t=1 Cash Flow Periods 2 - 6 Present Value Cash Flow Periods 7 - 12* Present Value Net Present Value

$25,000 $200 $65 100.00 9%

For help with Excel's PV function

* Hint: After period 5, the NPV of new investment must be zero. Therefore, find the Price that gives a net present value of zero for the given investment amount.

Copyright 2011 McGraw-Hill/Irwin

Enter the values in blue colored cells.

Chapter 11 Question 13
Student Name: Course Name: Student ID: Course Number:

Assumptions Equipment cost Annual cost to operate Depreciation (years 1-5) Silver ounces per year Silver price per ounce Marginal tax rate Cost of capital (real)

$100,000 $80,000 $20,000 5,000 $20 35% 8%

What is the NPV of the new equipment? Make additional assumptions as necessary. Assumed nominal cost of capital: Net Present Value Present value of tax shield Present value of silver Present value of operating costs Less: equipment costs Net Present Value

For help with Excel's PV function

Copyright 2011 McGraw-Hill/Irwin

Enter the values in blue colored cells.

Chapter 11 Question 16
Student Name: Course Name: Student ID: Course Number: a) By the end of year 2, the prospective increase in acid demand will require the construction of several new plants using the Phlogiston process. What is the likely NPV of such plants?

b)

What does that imply for the price of polysyllabic acid in year 3 and beyond? Find the price of polysyllabic acid such that the present value of the plants is equal to what you found in part a. Price

c) Would you expect existing plant to be scrapped in year 2? How would your answer differ if scrap values were $40,000 or $80,000? What is the present value of the plant in year 2? Would the plant be scrapped? d) The acid plants of United Alchemists, Inc., have been fully depreciated. Can it operate them profitably after year 2?

e) Acidosis, Inc., purchased a new plant last year for $100,000 and is writing it down by $10,000 a year. Should it scrap this plant in year 2?

f)

What would be the NPV of Phlogistons venture? What is today's scrap value? Find the price in years 1 and 2 that give this value: Price Enter a formula that calculates the present value of Phlogiston's plant Present Value

Copyright 2011 McGraw-Hill/Irwin