Chart Sample Text Histogram CREATING TEXT HISTOGRAMS

MonthUnits SoldChartJanuary834February1,132March1,243April1,094May902June1,543July1,654August2,123September1,566October1,434November1,321December1,654

BudgetActualPct. DiffUnder BudgetExceeded BudgetJan300311JanFeb300298FebMar300305MarApr350351AprMay350402MayJun350409JunJul500421JulAug500454AugSep500474SepOct500521OctNov500476NovDec500487Dec

FSTimberland Industries December 31 Balance Sheets(in thousands)20112010OperatingInvestingFinancingAssetsNIAT31,386-12,554Cash and cash equivalents91,45074,62516,825Deprc7,388Short-term investments11,40015,100(3,700)3,700Accounts Receivable103,36585,52717,838(17,838)Inventories38,44434,9823,462(3,462) Total current assets244,659210,23434,425 Fixed assets67,16542,43624,729(32,117)Total assets311,824252,67059,1540Liabilities and equity0Accounts payable30,76123,1097,6527,652Accruals30,47722,6567,8217,821Notes payable16,71714,2172,5002,500 Total current liabilities77,95559,98217,973Long-term debt76,26463,91412,35012,350 Total liabilities154,219123,89630,323Common stock100,00090,00010,00010,000Retained Earnings57,60538,77418,831 Total common equity157,605128,77428,831Total liabilities and equity311,824252,67059,15432,947(32,117)15,99516,825a. The companys sales for 2011 were 455,150, and EBITDA was 15 percent of sales. Furthermore,16,825Further, depreciation amounted to 11% of net fixed assets, interest charges were 8,575, the0corporate tax rate was 32%, and Timberland pays 40% of its net income out in dividends. Given this information, construct Timberlandland's 2011 income statement. All figures above are in thousands also.

The input information required for the problem is outlined in the "Key Input Data" section below. Usingthis data and the balance sheet above, we constructed the income statement shown below.

Key Input Data for Cumberland Industries

Sales Revenue455,150EBITDA as a percent of sales15%Depr. as a % of Fixed Assets11%Tax rate40%Interest Expense8,575Dividend Payout Ratio40%

20112010Sales455,150364,120Expenses excluding depreciation and amortization386,878321,109 EBITDA68,27343,011$5,145Depreciation (no amortization charges)7,3886,752 EBIT60,88436,259$3,430Interest Expense8,5757,829$8,575 EBT52,30928,430Taxes (40%)20,92411,372 Net Income31,38617,058

Common dividends12,5546,823Addition to retained earnings18,83110,235

b. Next, construct the firms statement of retained earnings for the year ending December 31, 2011, and then its 2011 statement of cash flows.

Statement of Retained Earnings``(in thousands)Retained Earnings, Jan 1, 201138,774Add: Net Income31,386Total70,160Less: Common Dividends12,554Retained Earnings, Dec 31, 201157,605Statement of Cash FlowsCash Provided/Used by Operating ActivitiesNet Income after Tax31,386Add: Depreciation7,388Net Cash Flow38,774Increase in A/R(17,838)Increase in Inventories(3,462)Increase in A/P7,652Increase in Accruals7,82132,947

Cash Provided/Used by Investing ActivitiesIncrease in Fixed Assets(32,117)

Cash Provided/Used by Financing ActivitiesDecrease in Short Term Investments3,700Increase in Notes Payable2,500Increase in Common Stock10,000Increase in Long Term Debt12,350Payment of Dividend(12,554)15,99516,825Add: Cash Balance, Jan 1, 201174,625Cash Balance, Dec 31, 201191,450

c. Calculate net operating working capital, total net operating capital, net operating profit after taxes, operating cash flow, and free cash flow for 2011

Working Capital= CA - CLNOWC =Operating CA - Operating CLCash+A/R+InvtyA/P=AccrualNet Operating Working CapitalNOWC11 = =Operating current assets-Operating current liabilities =233,25961,238172,021NOWC10 = =Operating current assets-Operating current liabilities =195,13445,765149,369Total Net Operating CapitalNet Investment in Operating CapitalTOC11 = =NOWC+Fixed assets47,381 =172,021+67,165239,186TOC10 =Gross Investment in Operating Capital =NOWC+Fixed assets54,769 =149,369+42,436191,805Net Operating Profit After Taxes (NO INTEREST)NIATNOPAT11 = =EBITx( 1 - T ) =60,884x60%36,531Operating Cash FlowNet Cash Flow - NIAT+DEPRCOCF11 = =NOPAT+Depreciation =36,531+7,38843,919Free Cash Flow - free to be distributed to investors after all investments made to Operations- via dividends, T/S, Interest, Principal, Inv. In Non -oprating assetFCF11 = =OCF-Gross investment in operating capital =43,919-54,769.15(10,850)or

FCF11 = =NOPAT-Net investment in operating capital =36,531-47,381.00(10,850)d. Calculate the firms EVA and MVA for 2011. Assume that Laiho had 10 million shares outstanding, that the year-end closing stock price was 17.25 per share, and its after-tax cost of capital was 12 percent.

Additional Input DataStock price17.25# of shares (in thousands)10,000A-T cost of capital12%

Market Value AddedMVA = =Stock pricex# of shares-Total common equity =17.25x10,000.00-157,60514,895Economic Value AddedEVA = =NOPAT-Operating Capital xAfter-tax cost of capital =36,531-239,186x12%7,828

ROIC, EVA

Income Statement (Thousands)200920102011Sales400,000.00420,000.00441,000.00Costs344,000.00361,994.20374,881.60Operating Profit56,000.0058,005.8066,118.40Interest Expense11,678.7012,262.8012,875.50Earnings Before Taxes44,321.3045,743.0053,242.90Taxes (see below for tax rate)17,728.5218,297.2021,297.16Net Income 26,592.7827,445.8031,945.74

Dividends21,200.0022,300.0023,400.00Addition to retained earnings5,392.785,145.808,545.74

Balance Sheets (Thousands)Assets200920102011Operating current assets162,000.00168,000.00176,400.00Total current assets162,000.00168,000.00176,400.00Net PPE199,000.00210,042.00220,500.00Total assets361,000.00378,042.00396,900.00

Liabilities and Shareholders' EquityOperating current liabilities57,911.5062,999.7066,150.00Total current liabilities57,911.5062,999.7066,150.00Long-term debt136,253.00143,061.00150,223.00Total liabilities194,164.50206,060.70216,373.00Total common equity166,835.50171,981.30180,527.04Total liabilities and equity361,000.00378,042.00396,900.04

Other DataTax rate40%40%40%Expected growth rate5.00%Weighted average cost of capital (WACC)10.02%Number of shares of stock (000)10,000

FCF Valuation200920102011NOPAT33,600.0034,803.4839,671.04Operating CA162,000.00168,000.00176,400.00Operating CL57,911.5062,999.7066,150.00NOWC104,088.50105,000.30110,250.00Net PPE199,000.00210,042.00220,500.00Total net operating capital303,088.50315,042.30330,750.00Investment in capital11,953.8015,707.70Net investment in operating capitalROIC (beginning capital)11.48%12.59%NOPAT/total net operating capital beginningFCF22,849.6823,963.34NOPAT -net investment in operating capital

2011FCF23,963.34Value of operations501,225.24This is also the horizon value calculationPlus the value of non-operating assets0Value of operation=FCFt +1gordon modelTotal value of the corporation501,225.24(return-growth rate)Minus value of debt216,373.00=23963.34(1+5%)Value of equity284,852.2410.02%-5%Price per share28.49=25161.5075.02%EVA 8,103.80501225.239043825EVA based on ROIC8,103.80

Forecast1Strategic planning is one of the core functions of an organization, and it involves the coordination of operatingplans with financial plans. While operational plans outline how the firm intends to reach its corporate objectives,financial plans outline the manner in which the firm will obtain the necessary productive assets to operate.Financial planning generally begins with a sales forecast, and that forecast generally starts with a review of thefirm's recent history. Here are XYZ Co sales over the past 5 years:

Annual Growth RateSales20072,0582058.0020082,53423.1%23.1%2261.33203.3320092,472-2.4%-2.4%2484.75223.4220102,85015.3%15.3%2730.25245.5020113,0005.3%5.3%3000.00269.75Average =10.3%10.3%

THE SALES FORECASTThe first step in a sales forecast are several ways to estimate the historical growth rate, ranging from the simple to the complicated. The simplest are to estimate the average annual growth rate and the compound annual growth rate.

Average annual growth rate =10.3%future value = present value (1+cagr) t (raise to time)Compound annual growth rate =9.88%fv9.88%^ -= raise pv9.88%array formula

Using Regression Analysis via Chart WizardRegression or Line of least squares or line of best fit

The chart shows the regression line. If you actually want the regression intercept and slope, the easiest way is to use the function Wizard to create the INTERCEPT and SLOPE functions, as shown below.

Intercept =-439,397 (Using the INTERCEPT function)SALES EQUATIONSALES = 220 YEAR - 439397

SLOPE 220INTERCEPT-439397

Slope = 220 (Using the SLOPE function)201232433243201334633463201436833683

You could always use the estimated interecept and slope to project the future sales, but an even easier way is to use the TREND function. This allows you to specify the past years and sales, and then specify a projected year. It then fits the regression line and gives you the projected value. See below for details.

Projected sales for2011= (Using the TREND function)

The compound growth rate is very sensitive to the particular starting and ending dates that are chosen. One way to smooth this out is to regress the natural log (LN) of sales versus the years. The slope coefficient is the estimate of the historical sales growth rate. See the chart below; we plotted the trendline and the regression equation.

Management started with the regression prediction, then modified it based on qualitative data to3,300, the forecasted value given in the text. Management's sales forecast represents a growth rate of 10%.

We examine a forecasting method for a firm using the percentage of sales of method. This forecasting method assumes that many items on the financial statements are proportional to sales. In particular, it assumes that the following items are proportional to sales: (1) Costs; (2) Cash (i.e., the company needs a certain amount of cash on hand, since it does not know exactly when the checks it writes or deposits will clear the bank); (3) Accounts receivable (the proportion will depend on the firm's credit policy; (4) Inventories; (5) Net plant and equipment (this is reasonable for the long-term; in the short-term, firm's often have excess capacity, which we discuss later in this model); (6) Accounts payable; and (7) Accruals. It also assumes that Depreciation is proportional to Net plant and equipment. Other items on the financial statements are a direct result of the firm's financial policies (i.e., dividend policy and capital structure policy), which we discuss below.

The next step is to analyze the historical "Pro Forma" ratios. The actual historical statements are shown below. The ratios needed for the Pro Forma analysis are shown below the actual statements.

Percentage of Sales MethodINCOME STATEMENTCommon Size statements(in thousands)2010201120102011

Sales2,850.03,000.0100.00%100.00%Costs except depreciation2,497.02,616.287.61%87.21%Depreciation90.0100.03.16%3.33%Total operating costs2,587.02,716.290.77%90.54%EBIT263.0283.89.23%9.46%Less Interest60.088.02.11%2.93%Earnings before taxes (EBT)203.0195.87.12%6.53%Taxes (40%)81.278.32.85%2.61%NI before preferred dividends121.8117.54.27%3.92%Preferred dividends4.04.00.14%0.13%NI available to common117.8113.54.13%3.78%

Dividends to common53.057.5Add. to retained earnings (DRE)64.856.0

Shares of common equity5050Dividends per share1.061.15Price per share26.0023.00

BALANCE SHEET Common size statements(in thousands)2010201120102011AssetsCash15.010.00.9%0.5%ST Investments65.00.03.9%0.0%Accounts receivable315.0375.018.8%18.8%Inventories415.0615.024.7%30.8%Total current assets810.01,000.048.2%50.0%Net plant and equipment870.01,000.051.8%50.0%Total assets1,680.02,000.0100.0%100.0%

2010201120102011Liabilities and equityAccounts payable30.060.01.8%3.0%Accruals130.0140.07.7%7.0%Notes payable60.0110.03.6%5.5%Total current liabilities220.0310.013.1%15.5%Long-term bonds580.0754.034.5%37.7%Total liabilities800.01,064.047.6%53.2%Preferred stock40.040.02.4%2.0%Common stock130.0130.07.7%6.5%Retained earnings710.0766.042.3%38.3%Total common equity840.0896.050.0%44.8%Total liabilities and equity1,680.02,000.0100.0%100.0%

Nave Forecast (based on latest data)PreliminaryPro Forma RatiosActualHistoricalIndustryForecast20102011AverageComposite2012

Costs / Sales87.6%87.2%87.4%87.1%87.2%Depreciation / Net plant & equip.10.3%10.0%10.2%10.2%10.0%Cash / Sales0.5%0.3%0.4%1.0%0.3%Accounts Rec. / Sales11.1%12.5%11.8%10.0%12.5%Inventory / Sales14.6%20.5%17.5%11.1%20.5%Net plant & equip. / sales30.5%33.3%31.9%33.3%33.3%Accounts Pay. / Sales1.1%2.0%1.5%1.0%2.0%Accruals / Sales4.6%4.7%4.6%2.0%4.7%Long-term bonds/operating assets
Michael C. Ehrhardt: Operating assets are equal to the sum of all assets except short-term investments.35.9%37.7%36.8%30.9%37.7%

Other Inputs (Assumptions)

Sales Growth Rate10%Tax rate40%Dividend growth rate8%Interest rate on notes payable and short-term investments8%Interest rate on long-term bonds10%Coupon rate on preferred stock10%Stock price23

Table 1 XYZ, Inc.: Actual and Projected Income Statements (Thousands)ActualForecastForecastAdjustmentsFinal Forecast201120122012(1)1.Sales3,000.010%2011 sales3,3003,300.02.Costs except depreciation2,616.287.2%2012 sales2,8782,877.63.Depreciation100.010%2012 net plant & equipt110110.04.Total operating costs2,716.22,9882,987.65.EBIT283.8312312.46.Less Interest88.0carry over from 2011887.Earnings before taxes (EBT)195.82248.Taxes (40%)78.3909.NI before preferred dividends117.513510.Preferred dividends4.0carry over from 2011411.NI available to common113.5131

12.Shares of common equity50.050.013.Dividends per share1.28%2011 Dividends1.214.Dividends to common57.562.115.Add. to retained earnings56.068.54

Table 2 XYZ, Inc.: Actual and Projected Balance Sheets (Thousands)Actual2011ForecastForecastAdjustmentsFinal Forecast(1)20122012Assets1.Cash10.00.33%2012 sales11.011.02.ST investments0.0carry over from 20110.00.03.Accounts receivable375.012.50%2012 sales412.5412.54.Inventories615.020.50%2012 sales676.5676.55.Total current assets1,000.01,100.01100.06.Net plant and equipment1,000.033.33%2012 sales1,100.01100.07.Total assets2,000.02,200.02200.0

Liabilities and equity8.Accounts payable60.02.00%2012 sales66.066.09.Accruals140.04.67%2012 sales154.0154.010.Notes payable110.0carry over from 2011110.027.9137.911.Total current liabilities310.0330.0357.912.Long-term bonds754.0carry over from 2011754.027.9781.913.Total liabilities1,064.01,084.01139.714.Preferred stock40.0carry over from 201140.040.015.Common stock130.0carry over from 2011130.055.7185.716.Retained earnings766.0addition to RE834.5834.517.Total common equity896.0964.51020.318.Total liabilities and equity2,000.02,088.52200.0

19.Required assetsa2,200.020.Specified sources of financingb2,088.521.Additional funds needed (AFN)111.4

Amount of New Capital:PercentAmount (000)Interest rateNotes Payable25%27.98%Long-term bonds25%27.910%Preferred Stock0%0.0Common Stock50%55.7-100%111.4`

aRequired assets include all forecasted operating assets plus the short-term investments from the previous year.bSpecified sources of financing include forecasted operating current liabilities, forecasted long-term bonds, forecasted preferred stock, forecasted common equity, and the amount of notes payable from the previous year.

Forecast2Percentage of Sales MethodINCOME STATEMENTCommon Size statements(in thousands)2010201120102011

Sales2,850.003,000.00100.00%100.00%Costs except depreciation2,497.002,616.2087.61%87.21%Depreciation90.00100.003.16%3.33%Total operating costs2,587.002,716.2090.77%90.54%EBIT263.00283.809.23%9.46%Less Interest60.0088.002.11%2.93%Earnings before taxes (EBT)203.00195.807.12%6.53%Taxes (40%)81.2078.322.85%2.61%NI before preferred dividends121.80117.484.27%3.92%Preferred dividends4.004.000.14%0.13%NI available to common117.80113.484.13%3.78%

Dividends to common53.0057.50Add. to retained earnings (DRE)64.8055.98

Shares of common equity5050Dividends per share1.11.2Price per share26.023.0

BALANCE SHEET Common size statements(in thousands)2010201120102011AssetsCash15.010.00.9%0.5%ST Investments65.00.03.9%0.0%Accounts receivable315.0375.018.8%18.8%Inventories415.0615.024.7%30.8%Total current assets810.01,000.048.2%50.0%Net plant and equipment870.01,000.051.8%50.0%Total assets1,680.02,000.0100.0%100.0%

2010201120102011Liabilities and equityAccounts payable30.060.01.8%3.0%Accruals130.0140.07.7%7.0%Notes payable60.0110.03.6%5.5%Total current liabilities220.0310.013.1%15.5%Long-term bonds580.0754.034.5%37.7%Total liabilities800.01,064.047.6%53.2%Preferred stock40.040.02.4%2.0%Common stock130.0130.07.7%6.5%Retained earnings710.0766.042.3%38.3%Total common equity840.0896.050.0%44.8%Total liabilities and equity1,680.02,000.0100.0%100.0%PreliminaryPro Forma RatiosActualHistoricalIndustryForecast20102011AverageComposite2012

Costs / Sales87.6%87.2%87.4%87.1%87.2%Depreciation / Net plant & equip.10.3%10.0%10.2%10.2%10.0%Cash / Sales0.5%0.3%0.4%1.0%0.3%Accounts Rec. / Sales11.1%12.5%11.8%10.0%12.5%Inventory / Sales14.6%20.5%17.5%11.1%20.5%Net plant & equip. / sales30.5%33.3%31.9%33.3%33.3%Accounts Pay. / Sales1.1%2.0%1.5%1.0%2.0%Accruals / Sales4.6%4.7%4.6%2.0%4.7%Long-term bonds/operating assets
Michael C. Ehrhardt: Operating assets are equal to the sum of all assets except short-term investments.35.9%37.7%36.8%30.9%37.7%

Other Inputs

Sales Growth Rate10%Tax rate40%Dividend growth rate8%Interest rate on notes payable and short-term investments8.0%Interest rate on long-term bonds10.0%Coupon rate on preferred stock10%

Funds raised as notes payable25%Funds raised as long-term debt25%Funds raised as preferred stock0%Funds raised as new common stock50%

MicroDrive, Inc.: Actual and Projected Income Statements (Millions)

ActualForecast2011ForecastBasis2012(1)(2)(3)1.Sales3,000.010%2011 Sales3,300.002.Costs except depreciation2,616.287.2%2012 sales2,877.603.Depreciation100.010%2012 NPE110.004.Total operating costs2,716.22,987.605.EBIT283.8312.406.Less Interest88.086.767.Earnings before taxes (EBT)195.8225.648.Taxes (40%)78.390.269.NI before preferred dividends117.5135.3810.Preferred dividends4.010% of average4.0011.NI available to common113.5131.38

12.Shares of common equity50.052.4713.Dividends per share1.28%2011 DPS1.2414.Dividends to common57.565.1715.Add. to retained earnings56.066.21

MicroDrive, Inc.: Actual and First Pass Projected Balance Sheets (Thousands)

ActualForecast2011ForecastBasis2,012.00(1)(2)(3)Assets1.Cash10.00.3%2012 Sales11.02.ST investments0.00.03.Accounts receivable375.012.50%2012 Sales412.54.Inventories615.020.50%2012 Sales676.55.Total current assets1,000.01,100.06.Net plant and equipment1,000.033.33%2012 Sales1,100.07.Total assets2,000.02,200.0

Liabilities and equity8.Accounts payable60.02.00%2012 Sales66.09.Accruals140.04.67%2012 Sales154.010.Notes payable110.0138.411.Total current liabilities310.0358.412.Long-term bonds754.0782.413.Total liabilities1,064.01,140.914.Preferred stock40.040.015.Common stock130.0186.916.Retained earnings766.0832.217.Total common equity896.01,019.118.Total liabilities and equity2,000.02,200.0

19.Required operating assets2,200.020.Specified sources of financing2,086.221.Additional funds needed (AFN)113.8

HOW THE AFN WILL BE RAISED:

Notes payable25%28.4Long-term debt25%28.4Preferred stock0%Common stock50%56.9 Total

Note: if the AFN is negative, then the firm has more than it needs to finance the assets. It could reduce its financing by paying off debt, buying back stock, or paying a larger dividend. Instead, we assume the firm will use any extra funds to purchase additional short-term investments.

New short-term investments =

New shares of stockNew equity issued =56.9Stock price =$23.00# new shares issued =2.473

Cash BudgetABC has projected the following sales for the first eight months of 2012 as follows:

Jan100,000May 275,000Feb 120,000Jun200,000Mar150,000Jul200,000Apr300,000Aug180,000

ABC collects 20% of sales in the month of the sale, 50% in the month following, and the remaining 30%,two months following the sale. During November and December 2011, sales were 220,000 and 175,000 respectively.

ABC purchases raw materials two months in advance of its sales equal to 65% of its final sales. The supplier is paidone month after delivery. Thus purchases for April sales are made in February and payment made in March.

In addition, ABC pays 10,000 per month for rent and 20,000 each month for other expenditures. Tax prepayments of 22,500 are made each quarter beginning in March. The company's cash balance as of Dec 31, 2011 was 22,000.A minimum balance of 20,000 must be maintained at all times to satisfy the bank's line of credit agreement.

ABC has arranged for a short term credit with its bank at an interest rate of 12% p.a. (1% per month) to be paid monthly.Borrowing to meet estimated monthly cash needs takes place at the end of the month, and interest is not paid until the end of the following month. Consequently, if the firm were to borrow 50,000 during the month of April, then it would pay500 in interest during May. Finally, ABC follows a policy of repaying its outstanding short-term debt in any month in which its cash balance exceeds the minimum cash balance of 20,000.

a) What will be the cash requirement for the next 6 months so that it can renegotiate the terms of a short-term credit arrangement with its bank, if necessary. To evaluate the problem, ABC plans to evaluate the impact of a +/- 20% variation in its monthly sales efforts. Prepare a 6-month cash budget and use it to evaluate the firm's cash requirements.

b) ABC has a note due in June. Will the firm have sufficient cash to repay the loan?

ABC Company Cash Budget

Minimum Cash BalanceBeginning Cash Balance

JanMay Feb JunMarJulAprAug

Collection1st MonthPurchases disb2nd Month% of Sales3rd MonthInterest rate

Cash Budget for January to June, 2012NovDecJanFebMarAprMayJunJulAugSalesCollections:1st month2nd month3rd monthTotal Collections

PurchasesPayments

Receipts

DisbursementsPayment for purchasesRentOther expendituresTax depositsInterest on S-T We fill this up lastTotal Disbursements

Net Monthly Change

Analysis of Borrowing NeedsBeginning Cash BalanceEnding Cash (Unadjusted) Borrowing Loan RepaymentEnding Cash (Adjusted)Cumulative Borrowing

TVMTIME VALUE OF MONEY PROBLEMS USING SPECIAL FUNCTIONS IN EXCEL:1) Calculate the Future Value given the following:

Present Value15,000.00Years2Rate12%Future Value (Formula)18,816.00fv=pv(1+r)tFuture Value (Excel Ftn)(18,816.00)2) Calculate the Present Value given the following:Future Value500,000.00Years5Rate10%Present Value (Formula)Present Value (Excel Ftn)(310,460.66)3) How much is the annuity payment given the following:Present Value0Future Value10,000.00Number of Payments5Interest Rate4%Annual Payment-$1,846.274) Determine the number of periods given the following:Present Value0Future Value10,000.00Annual Payment1,846.27Annual Rate4.00%Number of Years5.005) Determine the interest rate given the following:Present Value(10,500.00)Future Value0.00Annual Payment1,500.00Number of Years10Annual Rate7.07%6) Present Value and Future Value of an uneven stream of cash flows

YearCash FlowPV11,000.00(900.90)22,000.00(1,623.24)33,000.00(2,193.57)44,000.00(2,634.92)55,000.00(2,967.26)Interest Rate11.00%Present Value10,319.90(10,319.90)Future Value(17,389.63)Present value of cash inflows - present value of cash outflowsNon-Annual Compounding WorksheetInvestment1,000,000.00Simple Rate10.00%Periods per Year1Term (Years)1Future Value(1,100,000.00)

Investment1,000,000.00Simple Rate10.00%Periods per Year2Term (Years)1Future Value($1,102,500.00)Investment1,000,000.00Simple Rate10.00%Periods per Year12Term (Years)1Future Value

Non-Annual Compounding PeriodsPresent Value1,000,000.00Annual Rate10.00%FrequencyPeriods/YearFVAnnual11,100,000.00Semiannual21,102,500.00Quarterly41,103,812.89Bi-monthly61,104,260.42Monthly121,104,713.07Bi-weekly261,104,958.95Weekly521,105,064.79Daily3651,105,155.78ContinuousInfinite1,105,170.92

Amort AMORTIZATION SCHEDULEPrepare a Monthly amortization schedule for a house loan from pag-ibig given the following data

LOAN AMORTIZATION SCHEDULELoan Principal691,170.65Annual rate of interest10.0000%Periods/year12Number of years10Monthly payment9,133.87

Method 1Year-endMonthInterestPrincipalPrincipal0691,170.6515,759.763,374.12687,796.5325,731.643,402.23684,394.3035,703.293,430.59680,963.7245,674.703,459.17677,504.5455,645.873,488.00674,016.5465,616.803,517.07670,499.4875,587.503,546.38666,953.1085,557.943,575.93663,377.1795,528.143,605.73659,771.44105,498.103,635.78656,135.67115,467.803,666.07652,469.59125,437.253,696.62648,772.97135,406.443,727.43645,045.54145,375.383,758.49641,287.05155,344.063,789.81637,497.24165,312.483,821.39633,675.84175,280.633,853.24629,822.60185,248.523,885.35625,937.25195,216.143,917.73622,019.53205,183.503,950.38618,069.15215,150.583,983.29614,085.86225,117.384,016.49610,069.37235,083.914,049.96606,019.41245,050.164,083.71601,935.70255,016.134,117.74597,817.96264,981.824,152.05593,665.90274,947.224,186.66589,479.25284,912.334,221.54585,257.70294,877.154,256.72581,000.98304,841.674,292.20576,708.78314,805.914,327.96572,380.82324,769.844,364.03568,016.79334,733.474,400.40563,616.39344,696.804,437.07559,179.32354,659.834,474.04554,705.28364,622.544,511.33550,193.95374,584.954,548.92545,645.03384,547.044,586.83541,058.20394,508.824,625.05536,433.15404,470.284,663.59531,769.56414,431.414,702.46527,067.10424,392.234,741.65522,325.45434,352.714,781.16517,544.29444,312.874,821.00512,723.29454,272.694,861.18507,862.11464,232.184,901.69502,960.43474,191.344,942.53498,017.89484,150.154,983.72493,034.17494,108.625,025.25488,008.92504,066.745,067.13482,941.79514,024.515,109.36477,832.43523,981.945,151.93472,680.50533,939.005,194.87467,485.63543,895.715,238.16462,247.47553,852.065,281.81456,965.66563,808.055,325.82451,639.84573,763.675,370.21446,269.63583,718.915,414.96440,854.68593,673.795,460.08435,394.60603,628.295,505.58429,889.01613,582.415,551.46424,337.55623,536.155,597.72418,739.83633,489.505,644.37413,095.45643,442.465,691.41407,404.04653,395.035,738.84401,665.21663,347.215,786.66395,878.55673,298.995,834.88390,043.66683,250.365,883.51384,160.15693,201.335,932.54378,227.62703,151.905,981.97372,245.64713,102.056,031.82366,213.82723,051.786,082.09360,131.73733,001.106,132.77353,998.96742,949.996,183.88347,815.08752,898.466,235.41341,579.67762,846.506,287.37335,292.29772,794.106,339.77328,952.52782,741.276,392.60322,559.92792,688.006,445.87316,114.05802,634.286,499.59309,614.46812,580.126,553.75303,060.71822,525.516,608.37296,452.35832,470.446,663.43289,788.91842,414.916,718.96283,069.95852,358.926,774.95276,295.00862,302.466,831.41269,463.58872,245.536,888.34262,575.24882,188.136,945.74255,629.50892,130.257,003.63248,625.87902,071.887,061.99241,563.88912,013.037,120.84234,443.04921,953.697,180.18227,262.87931,893.867,240.01220,022.85941,833.527,300.35212,722.50951,772.697,361.18205,361.32961,711.347,422.53197,938.79971,649.497,484.38190,454.41981,587.127,546.75182,907.66991,524.237,609.64175,298.021001,460.827,673.05167,624.971011,396.877,737.00159,887.971021,332.407,801.47152,086.501031,267.397,866.48144,220.021041,201.837,932.04136,287.981051,135.737,998.14128,289.841061,069.088,064.79120,225.051071,001.888,132.00112,093.06108934.118,199.76103,893.29109865.788,268.0995,625.20110796.888,336.9987,288.21111727.408,406.4778,881.74112657.358,476.5270,405.21113586.718,547.1661,858.05114515.488,618.3953,239.66115443.668,690.2144,549.46116371.258,762.6335,786.83117298.228,835.6526,951.18118224.598,909.2818,041.91119150.358,983.529,058.3812075.499,058.38-0.00

286,750.63261,281.64

Excel functions1) How much is the monthly amortization payment2) How much interest is paid on the 2nd month-5,731.643) How much is the principal payment on the 18th month-3,885.354) How much is the cumulative interest payment for-62,769.18 the whole of 2nd year5) How much is the cumulative principal payment for the whole of the 4th year6) What is the total interest payment7) What is the total principal payment

Capital BudgetCAPITAL BUDGETING

Required Return10%PeriodOuflowInflowNet Cash Flow0(1,000,000.00)(1,000,000.00)1(20,000.00)350,000.00330,000.002(22,000.00)320,000.00298,000.003(24,000.00)350,000.00326,000.004(26,000.00)200,000.00174,000.005(28,000.00)210,000.00182,000.006(30,000.00)100,000.0070,000.00

NPV62,574.81if positive acceptableIRR12.58%higher than required return-acceptable

2) NPV vs IRRRequired Return12%PERIODPROJECT APROJECT B0(1,000,000.00)(1,000,000.00)10.00400,000.002200,000.00400,000.003300,000.00300,000.004500,000.00300,000.005900,000.00200,000.00

NPV 201,416.06193,695.28IRR17%20%16.19%16.04%

b) MIRR

PERIOD0(6,260.00)124,248.00224,248.00324,248.00424,248.00542,248.00

IRR388%CAGR

MIRR

3) Capital Rationing

ProjectCostNPVIncludeA237,00584,3341B766,49626,8810C304,04923,1620D565,17882,5981E108,99020,5901F89,13590,4041G795,66418,1630H814,49397,6821I480,32152,0631J826,61053,9110K734,83056,3231L910,59888,3491M978,62169,35214,919,1715,000,000.0080,829TOTAL NPV641,695

4) PROJECTS WITH UNEQUAL LIVESRank the following projects according to the most to the least preferred:

Required return12%ABCDTimeCash FlowCash FlowCash FlowCash Flow0(9,200)(6,500)(10,050)(12,500)117,00020,00030,00024,000217,00030,00030,00025,000317,00040,00030,00026,000417,00050,00030,00028,000517,00030,00030,000617,00031,000732,000834,000

NPV60,693.9295,520.0798,093.29126,094.79PVIFA4.113.043.604.97ANPV14,762.3231,448.5027,212.0325,383.24

5) Investment Opportunity Schedule

CostIRRA74,95013.00%B138,29811.48%C146,66112.19%D189,92113.82%E201,84311.69%F271,47715.38%G396,20916.16%H407,76916.51%I439,20715.87%J445,52915.02%

A company must decide whether to introduce a new product line. The new product will have startup costs, operational costs, and incoming cash flows over six years. This project will have an immediate (t=0) cash outflow of 1,000,000 (which include machinery, and employee training costs). Other cash outflows for years 16 are expected to be 20,000 for the first year, increasing by 2,000 for the next five years . Cash inflows are expected to be 350,000 for Year 1, followed by 320,000, 350,000, 200,000, 210,000 and 100,000 respectively for the next five years. All cash flows are after-tax, and there are no cash flows expected after year 6. The required rate of return is 10%. Determine the Net Present Value and the Internal rate of return of the project.

LookupVERTICAL LOOKUP, HORIZONTAL LOOKUP, INDEX and MATCH1) Using Vertical Lookup to look for data in a given arrayLast NameFirst NameDepartmentIDDate HiredEnter a name -->BasligNancyOperations34324/16/03Last NameFirst NameDepartmentIDDate HiredAbadYolandaSales44663/5/98BasligNancyOperations34324/16/03BolanteKenMarketing442212/1/04CandidoLarryAdministration28229/16/99ColladoMoeAdministration12313/12/01DionisioRitaAdministration26044/15/05DonatoJamesOperations39832/9/00EscalonPamelaData Processing21443/24/04EdralinPaulData Processing110211/12/03Income is Greater Than or Equal ToBut Less Than or Equal To RateEnter Income: 45,50002,65015.00%The Rate is: 31.00%(Vlookup)2,65127,30028.00%31.00%(Lookup)27,30158,50031.00%58,501131,80036.00%131,801284,70039.60%284,70145.25%

2) Using Horizontal LookupIncome is Greater Than or Equal To02,65127,30158,501131,801284,701Enter Income: 21,566But Less Than2,65027,30058,500131,800284,700The Tax Rate is: 28.00% Rate15.00%28.00%31.00%36.00%39.60%45.25%3) Using INDEX and MATCHDate:1/12/07DateWeekdayAmountAmount:1891/1/07Monday231/2/07Tuesday1791/3/07Wednesday1491891/4/07Thursday1961/5/07Friday1311/6/07Saturday1791/7/07Sunday1341/8/07Monday1791/9/07Tuesday1931/10/07Wednesday1911/11/07Thursday1761/12/07Friday1891/13/07Saturday1631/14/07Sunday1211/15/07Monday1001/16/07Tuesday1091/17/07Wednesday1511/18/07Thursday1381/19/07Friday1141/20/07Saturday1564) Comparison of the 3Value:JamesNameAmountBob50LOOKUP:300Ellen25VLOOKUP:300Froilan200MATCH & INDEX300James300Jessica400John100Teddy150Jun240Eric245Jazz346

5) TWO-WAY LookupMonth: AprilProduct 1Product 2Product 3CombinedProduct: Product 2January2,8921,7714,7189,381February3,3804,7112,61510,706Month Offset (Row #): 5March3,7443,2235,31212,279Product Offset (Col #): 3April3,2212,4381,1086,767Sales: 2,438May4,8391,9991,9948,832June3,7675,1403,83012,737July5,4673,3373,23212,036Single-formula -->2,438August3,1544,8951,6079,656September1,7182,0401,5635,321October1,5481,0612,5905,199November5,0833,5583,96012,601December5,7532,8393,01311,605Total44,56637,01235,542117,120

Array1WORKING WITH ARRAY FORMULAS 11) Using an array formula to eliminate intermediate formulas ProductUnits SoldUnit PriceNormal CalcsWidgets350150Ridgets101001,000Lidgets520100Kidgets91090Fidgets360180Zidgets12002001,720(SUM formula)1,720(SUMPRODUCT Formula)1,720(Single array formula)

2) Conditional Sum Example with an Array Find the total of sales made by salesperson SanchezNameSaleSanchez880Excel built-in function: The SumIF methodJones3501,896Santos441Reyes280Aguila385The array formula methodFortes2811,896Jordan300Milanes250Sanchez201Row LabelsSum of SaleWong398Sanchez1896Evangelista440Grand Total1896Sanchez595Fortes560Sanchez2203) An array formula: Calculate a single result Use array formulas to find the average revenue for all divisions in both sales areas.2010SalesProduct 1NCR161,000Calabarzon198,200

Product XProduct XNCR35,000NCR35,000Calabarzon60,000Calabarzon60,000 Add this new data into the mix.Product 2 The array formula handles it.NCR160,700The average function doesn't.Calabarzon190,100 Product 3 NCR153,900Calabarzon190,700

AVE FunctionARRAYAverage NCR158,533127,650Average Calabarzon193,000159,750

Array2WORKING WITH ARRAY FORMULAS 2Example: SUM and Nested Ifs in an Array Formula Find the sum of sales for a particular state and a particular beer type.

Determine the following:a) Total sales from Oregon of Amber Ale beerb) Total sales from California Pale Alec) Total 2008 sales of Ted of Pilsner from Wahington390,741d) Average sales of Stout from Wahington in 2008e) Average sales of Deb in Winter for the past three years

Sample:Washington, Amber Ale:6,674,0056,674,005

SeasonYearSalesTypeStateSales_BeerSalesman Fall2008Amber AleCalifornia554,536TedFall2008HefeweizenCalifornia540,643DebFall2008Pale AleCalifornia577,548TedFall2008PilsnerCalifornia455,905JunFall2008PorterCalifornia490,871JunFall2008StoutCalifornia446,383DebFall2008Amber AleOregon457,726TedFall2008HefeweizenOregon347,696JunFall2008Pale AleOregon384,541KateFall2008PilsnerOregon386,420TedFall2008PorterOregon370,970KyleFall2008StoutOregon430,754DebFall2008Amber AleWashington500,847JunFall2008HefeweizenWashington507,070JunFall2008Pale AleWashington482,346TedFall2008PilsnerWashington608,713KateFall2008PorterWashington150,000KateFall2008StoutWashington500,649TedSpring2008Amber AleCalifornia545,780KateSpring2008HefeweizenCalifornia440,644DebSpring2008Pale AleCalifornia580,359KateSpring2008PilsnerCalifornia536,225KyleSpring2008PorterCalifornia414,908TedSpring2008StoutCalifornia377,997JunSpring2008Amber AleOregon331,289KateSpring2008HefeweizenOregon384,572KateSpring2008Pale AleOregon365,813DebSpring2008PilsnerOregon396,338JunSpring2008PorterOregon453,761KateSpring2008StoutOregon356,538TedSpring2008Amber AleWashington606,332DebSpring2008HefeweizenWashington535,218JunSpring2008Pale AleWashington493,364KateSpring2008PilsnerWashington559,100KateSpring2008PorterWashington220,350TedSpring2008StoutWashington476,975TedSummer2008Amber AleCalifornia545,621KateSummer2008HefeweizenCalifornia489,255JunSummer2008Pale AleCalifornia523,124TedSummer2008PilsnerCalifornia612,216JunSummer2008PorterCalifornia425,562JunSummer2008StoutCalifornia485,285JunSummer2008Amber AleOregon467,173KateSummer2008HefeweizenOregon447,637TedSummer2008Pale AleOregon407,542JunSummer2008PilsnerOregon449,575KateSummer2008PorterOregon403,248DebSummer2008StoutOregon449,293JunSummer2008Amber AleWashington493,845JunSummer2008HefeweizenWashington523,464JunSummer2008Pale AleWashington575,692DebSummer2008PilsnerWashington568,633KateSummer2008PorterWashington100,250JunSummer2008StoutWashington487,012KateWinter2008Amber AleCalifornia519,177TedWinter2008HefeweizenCalifornia488,597TedWinter2008Pale AleCalifornia456,653TedWinter2008PilsnerCalifornia528,843TedWinter2008PorterCalifornia420,782KateWinter2008StoutCalifornia439,751TedWinter2008Amber AleOregon348,503KateWinter2008HefeweizenOregon352,086JunWinter2008Pale AleOregon336,824DebWinter2008PilsnerOregon350,924KateWinter2008PorterOregon338,334KateWinter2008StoutOregon383,738TedWinter2008Amber AleWashington508,939TedWinter2008HefeweizenWashington393,294TedWinter2008Pale AleWashington430,380KateWinter2008PilsnerWashington390,741TedWinter2008PorterWashington118,030JunWinter2008StoutWashington522,282DebFall2009Amber AleCalifornia514,649TedFall2009HefeweizenCalifornia498,673KateFall2009Pale AleCalifornia541,930KateFall2009PilsnerCalifornia541,022JunFall2009PorterCalifornia487,516KateFall2009StoutCalifornia558,787KateFall2009Amber AleOregon393,690DebFall2009HefeweizenOregon427,784KateFall2009Pale AleOregon386,772TedFall2009PilsnerOregon430,461JunFall2009PorterOregon481,311KyleFall2009StoutOregon529,637JunFall2009Amber AleWashington596,707JunFall2009HefeweizenWashington541,275JunFall2009Pale AleWashington574,091TedFall2009PilsnerWashington567,246KateFall2009PorterWashington530,193KateFall2009StoutWashington475,884KateSpring2009Amber AleCalifornia533,691TedSpring2009HefeweizenCalifornia534,352DebSpring2009Pale AleCalifornia588,845TedSpring2009PilsnerCalifornia513,750KateSpring2009PorterCalifornia516,692JunSpring2009StoutCalifornia539,883TedSpring2009Amber AleOregon418,483KateSpring2009HefeweizenOregon452,955JunSpring2009Pale AleOregon432,909JunSpring2009PilsnerOregon493,853TedSpring2009PorterOregon393,368KateSpring2009StoutOregon405,946TedSpring2009Amber AleWashington561,874KateSpring2009HefeweizenWashington544,747DebSpring2009Pale AleWashington470,339DebSpring2009PilsnerWashington530,410JunSpring2009PorterWashington455,378DebSpring2009StoutWashington668,180JunSummer2009Amber AleCalifornia597,626KateSummer2009HefeweizenCalifornia612,909TedSummer2009Pale AleCalifornia585,669DebSummer2009PilsnerCalifornia641,282KateSummer2009PorterCalifornia447,013TedSummer2009StoutCalifornia476,238DebSummer2009Amber AleOregon421,466TedSummer2009HefeweizenOregon427,983JunSummer2009Pale AleOregon429,498TedSummer2009PilsnerOregon544,597KyleSummer2009PorterOregon446,014TedSummer2009StoutOregon487,611TedSummer2009Amber AleWashington565,106TedSummer2009HefeweizenWashington567,487KateSummer2009Pale AleWashington538,648TedSummer2009PilsnerWashington708,608TedSummer2009PorterWashington634,104TedSummer2009StoutWashington522,179JunWinter2009Amber AleCalifornia511,406JunWinter2009HefeweizenCalifornia487,020JunWinter2009Pale AleCalifornia563,504KateWinter2009PilsnerCalifornia565,428KateWinter2009PorterCalifornia380,743TedWinter2009StoutCalifornia351,971KateWinter2009Amber AleOregon388,646TedWinter2009HefeweizenOregon337,401TedWinter2009Pale AleOregon441,713JunWinter2009PilsnerOregon438,764TedWinter2009PorterOregon378,201JunWinter2009StoutOregon413,519DebWinter2009Amber AleWashington516,512KateWinter2009HefeweizenWashington494,282KateWinter2009Pale AleWashington538,958JunWinter2009PilsnerWashington502,214JunWinter2009PorterWashington539,525TedWinter2009StoutWashington517,806TedFall2010Amber AleCalifornia625,097KateFall2010HefeweizenCalifornia632,542JunFall2010Pale AleCalifornia565,957KateFall2010PilsnerCalifornia609,354JunFall2010PorterCalifornia501,393JunFall2010StoutCalifornia461,281TedFall2010Amber AleOregon476,654JunFall2010HefeweizenOregon405,717KateFall2010Pale AleOregon407,780JunFall2010PilsnerOregon462,903TedFall2010PorterOregon460,030KateFall2010StoutOregon463,982KateFall2010Amber AleWashington622,573TedFall2010HefeweizenWashington578,387TedFall2010Pale AleWashington579,998JunFall2010PilsnerWashington594,253JunFall2010PorterWashington473,198KateFall2010StoutWashington601,406TedSpring2010Amber AleCalifornia616,561DebSpring2010HefeweizenCalifornia559,403TedSpring2010Pale AleCalifornia597,369DebSpring2010PilsnerCalifornia709,122TedSpring2010PorterCalifornia462,316DebSpring2010StoutCalifornia466,554JunSpring2010Amber AleOregon380,338TedSpring2010HefeweizenOregon406,420TedSpring2010Pale AleOregon422,373TedSpring2010PilsnerOregon385,923DebSpring2010PorterOregon474,148DebSpring2010StoutOregon438,409KateSpring2010Amber AleWashington554,317KateSpring2010HefeweizenWashington609,069DebSpring2010Pale AleWashington563,406TedSpring2010PilsnerWashington606,490KateSpring2010PorterWashington564,560JunSpring2010StoutWashington600,194JunSummer2010Amber AleCalifornia549,802KateSummer2010HefeweizenCalifornia493,119KateSummer2010Pale AleCalifornia576,355JunSummer2010PilsnerCalifornia670,233JunSummer2010PorterCalifornia524,001KateSummer2010StoutCalifornia527,703JunSummer2010Amber AleOregon355,197TedSummer2010HefeweizenOregon420,947JunSummer2010Pale AleOregon423,393KateSummer2010PilsnerOregon547,726TedSummer2010PorterOregon478,507KateSummer2010StoutOregon425,549JunSummer2010Amber AleWashington618,631KateSummer2010HefeweizenWashington593,074KateSummer2010Pale AleWashington708,115TedSummer2010PilsnerWashington657,230KateSummer2010PorterWashington636,020KateSummer2010StoutWashington648,918DebWinter2010Amber AleCalifornia508,848DebWinter2010HefeweizenCalifornia522,433TedWinter2010Pale AleCalifornia526,729JunWinter2010PilsnerCalifornia504,010TedWinter2010PorterCalifornia426,401TedWinter2010StoutCalifornia430,903TedWinter2010Amber AleOregon319,614JunWinter2010HefeweizenOregon417,155DebWinter2010Pale AleOregon395,381KateWinter2010PilsnerOregon385,921TedWinter2010PorterOregon349,157KateWinter2010StoutOregon375,737DebWinter2010Amber AleWashington528,322TedWinter2010HefeweizenWashington497,798KateWinter2010Pale AleWashington515,122KateWinter2010PilsnerWashington501,404DebWinter2010PorterWashington518,350KateWinter2010StoutWashington445,582Deb

Exercise 2InvoiceNumOfficeAmountDateDueTodayDifferenceAG-0145Manila5,000.004/1/115/5/11-34AG-0189Cebu450.004/19/115/5/11-16AG-0220Davao3,211.564/28/115/5/11-7AG-0310Manila250.004/30/115/5/11-5AG-0355Davao125.505/4/115/5/11-1AG-0409Davao3,000.005/10/115/5/115AG-0581Manila2,100.005/23/115/5/1118AG-0600Manila335.395/23/115/5/1118AG-0602Davao65.005/28/115/5/1123AG-0633Cebu250.005/30/115/5/1125TOTAL

Total past due daysTotal past due days (array formula)

Total amount past dueTotal amount past due (array formula)

Total for Manila only

Total for all except Manila

Total amount with due date beyond May 1

Total past due amount for Manila (Excel 2007 only)Total past due amount for Manila (array formula)

Total past due amounts OR amounts for Manila (array formula)

Total past due amounts for Manila and Cebu (array formula)

Array3Adjusted Closing Stock PricesSTOCKABCDEF3-Jan-1235.331.9422.2635.763.7213.231-Dec-1137.6832.0623.3936.563.4214.641-Nov-1137.6230.7422.3835.1560.3214.181-Oct-1136.1928.6222.2233.9258.1113.031-Sep-1133.9127.5220.0233.3856.0713.942-Aug-1128.5126.5321.2532.457.83141-Jul-1130.82724.332.8654.7314.611-Jun-1136.425.5327.5132.0255.1615.433-May-1130.6625.9228.4530.5755.1714.641-Apr-1125.2626.7325.629.4253.2315.141-Mar-1124.2428.0527.0729.9849.9713.292-Feb-1122.1727.7829.0631.9453.1113.472-Jan-1123.4925.2730.3332.8352.3914.241-Dec-1022.5124.3831.8530.2550.6715.573-Nov-1021.525.1633.3327.8148.3512.851-Oct-1021.8524.1732.7328.1449.1311.812-Sep-1017.6922.7627.3328.9248.3410.41-Aug-1016.6921.6728.428.5148.411.161-Jul-1015.5622.2424.727.4250.3210.682-Jun-1016.3521.3320.6527.6550.2310.511-May-1014.9218.1120.6627.4952.810.041-Apr-1012.3916.5318.2428.2154.529.853-Mar-1012.0113.9816.1424.4255.987.123-Feb-1010.4313.1617.123.0350.747.882-Jan-109.113.7715.5121.9951.658.632-Dec-098.1815.5515.4223.1451.748.721-Nov-099.1417.8820.6725.5754.9310.671-Oct-097.4617.2717.1123.8156.417.933-Sep-094.7816.8413.7423.2551.929.081-Aug-095.1422.6516.4928.2352.1410.91-Jul-096.5923.618.5630.1550.3212.483-Jun-097.3827.1318.0527.249.9914.711-May-098.0128.5527.2828.9858.6916.221-Apr-097.3827.0828.2429.3660.8814.621-Mar-099.2326.4630.0234.8161.9215.061-Feb-097.2324.8828.1835.8358.0613.592-Jan-098.6225.9134.5734.4154.6613.983-Dec-088.8725.2431.0337.1356.1714.261-Nov-087.7825.5932.2235.555.3617.181-Oct-085.4424.6224.0733.5854.8714.564-Sep-084.4125.6320.1534.3152.4915.591-Aug-085.9328.3627.5637.5549.9417.862-Jul-088.8127.5229.3739.9451.0922.621-Jun-089.9925.5528.8244.8447.1821.81-May-089.0628.5926.6144.8445.7821.632-Apr-0810.0925.9730.4344.4145.2326.181-Mar-087.8825.0725.938.3141.0124.721-Feb-0811.927.7628.1242.445.6324.452-Jan-0818.6627.7236.4141.9243.3724.781-Dec-0715.0332.1129.5843.7148.9320.391-Nov-0719.8230.137.4545.0446.5719.792-Oct-0729.3229.0844.2649.8142.6122.721-Sep-0745.528.3240.8852.5443.4521.921-Aug-0760.7528.0473.6453.1642.5320.793-Jul-0764.3529.7365.6446.8742.7622.91-Jun-0761.9430.965.7347.9346.8120.761-May-0756.5333.661.347.641.1221.823-Apr-0765.1235.7162.3247.437.6324.61-Mar-0785.6935.0764.8446.9132.0520.311-Feb-0779.8529.7955.5339.5532.8418.4126-Jan-0780.5135.0748.5940.0438.9822Ave RetStd DevCAGRBeta

Goal SeekGOAL SEEKThe Goal Seek function causes Excel to change a selected input value in a formulauntil the formula produces a desired result. Thus, Goal Seek tells you the value of someinput necessary to reach a given goal.

Discount rate:10.000%Project XYears0123NPVX154.40Cash flows(1,000)650500200IRRXProject YYears0123NPVY162.28Cash flows-1,000.00200.00550.00700.00IRRY

Project XProject Y

0%5%10%15%20%25%

At what point will we be indifferent to the two projects:

NPVXNPVYDifferenceUse GOAL Seek to determine what rate will we be indifferent to the two options

Solver1OPTIMIZATION USING SOLVER 1) Blue Ridge Hot Tubs manufactures and sells two models of hot tubs: the Aqua-Spa and the Hydro-Lux. The owner of the company needs to decide how many of each type to produce for the next production cycle. Prefabricated fiberglass hot tub shells are boughtfrom a local supplier and pump and tubing are added to create the hot tubs. (The supplierhas the capacity to deliver as many as the company needs). The same type of pump is installedinto both hot tubs. Each Aqua requires 9 hrs of labor and 12 ft of tubing. Each Hydro requires6 hrs of labor and 16 ft of tubing. The company expects 1,866 hrs of production labor hours and2,880 ft of tubing available. A CM of 350 and 300 is earned on each Aqua and Hydro respectively.The company expects to be able to sell all that it produces. There are 300 pumps available.How many Aqua and Hydro should be produced to maximize profits?

2)Cash Flow Optimization ProblemMexicali is a small but growing restaurant chain specializing in Mexican fastfood. The management of the company has decided to build a new location inQuezon City, and wants to establish a construction fund (or sinking fund) to pay for the new facility. Construction of the restaurant is expected to take six months and cost P 40,000,000. Mexicali's contractwith the construction company requires it to make payments of P 12,500,000 at the end of the second and fourth months, and a final payment of P 15,000,000 at the end of the sixth month when the restaurant is completed. The company can use four investment opportunities to establish the construction fund; these investments are summarized in the following table:

Available inMonths toYield atInvestmentMonthMaturityMaturityA1, 2, 3, 4, 5, 611.8%B1, 3, 523.5%C1, 435.8%D1611.0%

The table indicates that investment A will be available at the beginning ofeach of the next six months, and funds invested in this manner mature in one month with a yeild of 1.8%. Funds can be placed in investment C only at the beginning of months 1 and/or 4, and mature at the end of three months with a yeild of 5.8%.

The management of Mexicali needs to determine the investment plan that allows them to meet the required schedule of payments while placing the least amountof money in the construction fund.

This is a multi-period problem because a six-month planning horizon must be considered. That is, Mexicali must plan which investment alternatives to use at various times during the next six months.

Solver2A PRODUCTION AND INVENTORY PLANNING PROBLEM

The AirComp Corporation manufactures heavy duty air compressors for thehome and light industrial markets. Upton is presently trying to plan its production and inventory levels for the next six months. Because of seasonal fluctuations in utilityand raw material costs, the per unit cost of producing aircompressors varies from month to month--as does the demand for aircompressors. Production capacity also varies from month to month due to differences in the number of working days, vacations, and scheduled maintenanceand training. The following table summarizes the monthly production costs,demands, and production capacity AirComp's management expects to face overthe next six months.

Month123456Unit Production Cost240250265285280260Units Demanded1,0004,5006,0005,5003,5004,000Maximum Production4,0003,5004,0004,5004,0003,500

Given the size of AirComp's warehouse, a maximum of 6,000 units can be held in inventory at the end of any month. The owner of the company likes to keep at least 1,500 units in inventory as safety stock to meet unexpecteddemand contingencies. To maintain a stable workforce, the company wants to produce at no less than one half of its maximum production capacity eachmonth. The controller estimates that the cost of carrying a unit in anygiven month is approximately equal to 1.5% of the unit production cost in thesame month. AirComp estimates the number of units carried in inventory eachmonth by averaging the beginning and ending inventory for each month.

There are 2,750 units currently in inventory. The company would like to identifythe production and inventory plan for the next six months that will meet theexpected demand each month while maximizing production and inventorycosts.

RegressionREGRESSION ANALYSISUsing lineUsing TrendMonthXActual YPredicted YPredicted YForecastedmbJan1512Feb2743Mar3559Apr4875May5755Jun6890Jul7663Aug8934Sep91,042Oct101,102Nov11Dec12