Time Value of Money Calculations
Assignment 3: Time Value of Money Calculations
The IT department has requested an update in its server population. This upgrade is required to maintain a competitive position. The CEO has asked that you evaluate the project and submit a recommendation to her, in terms of whether the company should move forward with this request. The calculated value of the project is a reduction of expenses, including power and replacement costs, as shown in Table-1:
Year
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Order Paper NowDecrease in Expenses
1
$30,000.00
2
$100,000.00
3
$120,000.00
4
$100,000.00
5
$30,000.00
Assume the impact after five years to be immeasurable. The cost of capital to the firm is currently 8% and the cost of the project today is $286,000.Required:
Calculate the net present value of the project
Calculate the internal rate of return
Calculate the payback period
Calculate the discounted payback period
Submit an Excel file with your calculations, and a 2-to-5-page paper that explains the calculations and provides your final assessment and decision. Justify your recommendations. The paper must be submitted as a Word document and it must follow APA style guidelines
Assignment 3 Grading Criteria
Maximum Points
Calculated the NPV of the project correctly, explaining the results clearly
20
Calculated the IRR of the project correctly, explaining the results clearly
20
Calculated the Payback Period of the project correctly, explaining the results clearly
20
Calculated the Discounted Payback Period of the project correctly, explaining the results clearly
20
Synthesized an effective, well-reasoned recommendation for improvement.
12
Used correct spelling, grammar, and punctuation and followed APA style guidelines.
8
Total:
100
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