EXERCISE 1.-

You are working for the company TBS. TBS would like to invest in a project; however they have

a lot of doubts. They want to reach more details about the future and development of project.

The company has some data and you have to collect them and give an answer with the

possible choices for TBS.

You have information related to:

- amount of expenses in every year: 20.000 $

- amount of incoming in every year: 40.000 $ from the third year to the final life of the

project

- period of life of the project: 15 years

- necessary expenses to develop the project (in first and second year only): 40.000 $

- interest on investment: 7,5%

Will the company earn money at the end of the life of the project?

Present value:

When is the company going to get money at first time?

Payback point:

SOLVE IN EXCEL:

Draw the cash-flow graph

EXERCISE 2.-

TBS think that information is not enough to take a good decision, so they want to introduce

more parameters to take a good decision.

They want to know the risk of the investment, so what is the maxim value of the interest of

investment to be zero the net actual value at the end of the period?

SOLVE IN EXCEL: Objective function

Rate of return on capital:

EXERCISE 3.-

Despite you gave a good answer they want to learn more about the project and they want to

know the evolution of the net present value analysis. They ask you for a comparison of this

value from 5% of interest of investment to 12% with an increase of 0,5%. Furthermore they

want a graph.

SOLVE IN EXCEL. Method Table analyses

EXERCISE 4.-

Despite the results you have given to the company they still have more doubts. They want to

study more variables. They guess that the value of the production will increase a 0,13% per

year. With this new theater of operations they want to know the new values of all the

parameters of the project if the increase of production is changing from 0 to 0,5% with an

increase of 0,05%.

SOLVE IN EXCEL: Method. Double entry table analyses.