Microsoft Office Tutorials and References
In Depth Information
Review Questions
The first date represents the start of the project. The dates may occur in any order
afterward, as long as they are after the start date. The guess value is either your guess
or 10 percent
the default value.
REVIEW QUESTIONS
You will find these examples in the Excel Chapter 30 file:
1. As part of a four-year investment scheme, a real-estate company is about to
invest \$4,000,000 to purchase an apartment building consisting of 40 units. The
company
s exit strategy is to sell the building in two years.
As an analyst for the real estate company, you need to determine an accurate
Net Present Value of the investment. Based on past experience, the costs for the
next four years can be estimated. These are: maintenance costs, labor, adver-
tisement, commission, real estate taxes, and so on. The income cash
ows are
also known. They are the rental fees. The selling price two years from now from
now is estimated to be \$4,400,000.
The problem is that the cash
ows are not always received or paid in
monthly intervals. Some corporate customers may pay once every quarter, and
maintenance costs and taxes are also deducted at dates that are not necessarily
end-of-month dates. You want to calculate an accurate NPV taking into con-
sideration the different intervals.
Use the XNPV function to work with the data on the Review sheet. The
discount rate to be used is 10 percent.
Cash
Flow
Cash
Flow
Cash
Flow
Date
Cash Flow
Date
Date
Date
5-May-10
4,000,000 5-Dec-10
24,000 5-Jun-11
26,000 5-Jan-12
17,000
5-Jun-10
24,000 5-Jan-11
2,350 5-Jul-11
26,000 20-Jan-12
62,000
5-Jul-10
24,000 20-Jan-11
58,000 5-Aug-11
8,900 5-Feb-12
26,000
5-Aug-10
8,400 5-Feb-11
24,000 5-Sep-11
26,000 5-Mar-12
26,000
5-Sep-10
24,000 5-Mar-11
24,000 20-Sep-11
62,000 5-Apr-12
13,000
20-Sep-10
58,000 5-Apr-11
8,400 5-Oct-11
26,000 5-May-12
62,000
5-Oct-10
13,200 5-May-11
24,000 5-Nov-11
26,000 20-May-12
4,400,000
5-Nov-10
24,000 20-May-11
59,000 5-Dec-11
22,000
2. Use the XIRR to
gure out the internal rate of return on the above investment.