BYU Student Author: @Dallin_Gardner
Reviewers: @Jimmy_Han, @Benjamin_Lau
Estimated Time to Solve: 10 minutes
We provide the solution to this challenge using:
- Excel
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Overview
You are a head financial analyst of SmartHome.Co about to head into a strategy meeting later today. You have been asked to prepare some basic financial analysis to help decide what the next steps of growth in the company are. The company is trying to decide whether to expand within an existing region of the company or to expand by opening a new region. Use the ratio functions to determine which project will be more profitable and then use additional functions to determine how the company will finance the more profitable project.
Instructions
- Use the data given in order to find the projected Internal Rate of Return (IRR) and the Net Present Value (NPV). This will help us determine the projects profitablilty based on the cash flows for the next 6 years.
- Once you have found the values for these two financial indicators, select the project with the highest IRR. If the IRR is the same, or if the is less than 0.1% difference, select the project with the highest NPV.
- Input the initial outlay (the year 0 negative cash flow) of the project into the next sheet
- Input the information given about the bonds into the appropriate cells
- Use the PV function to find the present Value of the bonds
- Take out the commission to find the net value, and then calculate how many bonds will need to be sold to cover the costs of the project and unexpected costs rounded up to the nearest whole number
Data Files
Suggestions and Hints
Use the =RoundUp function to avoid hardcoding the number of bonds to sell
Solution