Teaching Week 9 Timetabling Week 15 Seminar 6 Financial Models LearningObjectivesoftheSeminarAchievedthrough1.DemonstrategoodunderstandingofCompletionoftask1 future and present values under 2 interestrate regimes i.e. simple and compound,respectively;2. Demonstrate good skills on creating adynamic working sheet in Excel;Completion of the two seminar tasks3. Demonstrate good understanding of NPVand IRR;Completion of task 24. Know the use of Excel function NPV andIRRCompletion of task 25. Show independent learning skills The application of Excel function NPV &IRR6. Communication and problem solvingskillsPeer discussion and ask questions to tutorTask 1The following are two investment scenarios:Scenario 1: £8,000 at 6.5% with simple interest rateScenario 2: £5,000 at 6.5% with annual compound interest rateIn Excel, draw up a table with the following data: Scenario number, Capital,Interest rate, Type of Interest. Then, please create a dynamic process in the tableto calculate the accrued interest each year for 45 years from now on, for each ofthe scenario.Graph the sums accrued and identify what year the sums accrued swap from oneinvestment being the largest to the other.Task 2A business has two projects to invest in, as follows:Create a new spread sheet, calculate NPV for the following projects at discountrates of 3% and 7%, respectively, by creating a dynamic process.Project 1 Project 2Year Cashinflows Cashoutflows Cashinflows Cashoutflows0 0.00 70,000.00 0.00 70,000.001 24,000.00 13,000.00 25,000.00 15,000.002 22,000.00 1,000.00 25,000.00 –3 25,000.00 – 20,000.00 –4 25,000.00 – 43,000.00 21,000.005 17,500.00 7,500.00 20,000.00 5,000.00P1: NPV P2: NPVThen,a) by using a built-in/Excel function, calculate the NPV for each projectwith discount rates of 3% and 7%, respectively;b) By comparing the NPVs at the rate of 3%, which project gives the betterreturn to the company;c) Construct a table to show the NPV for the above selected project i.e. theproject gives the better return) for a range of discount rates between 3%and 16%;d) Construct a graph to estimate the IRR using your table;e) Confirm the estimate made in step d) using the built-in/Excel IRRfunction.
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