Fin 100 Assignmnet NPV, IRR, MIRR for Mac and PC Excel, business and finance homework help

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

Complete the following homework scenario:

  • Required:
    Compare the results of the three (3) methods by quality of
    information for decision making. Using what you have learned about the three (3)
    methods, identify the best project by the criteria of long term increase in
    value. (You do not need to do further research.) Convey your understanding of
    the 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 previously
    listed in Week 4) to help you understand the foundational concepts:

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

    1. Payback Period: Gas Station A is paid back in 2 years; CF1
      in 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 mutually
      exclusive projects, the investment paid back in the shortest time is
    2. Net Present Value: Consider the gas station example above
      under the NPV method, and a discount rate of 10%:
      NPVgas station A
      = $100,000/(1+.10)2 – $50,000 =
      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,

    Summary of the Three (3) Methods:

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

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