Could any help in solving those two Excel questions?
2. A project requires an upfront investment of $175,000. Your boss
would like you to create a table that shows the impact of various sales growth
rates and selling price growth rates on the Net Present Value. You are to
assume that there will be eight years of cash flows from the investment. The
first year sales are assumed to be 1000 units at a price of $105 per unit. The
selling price is $105/unit during year 1. The variable cost per unit is assumed
to remain at $42 for each of the next nine years. The fixed costs are $13,000
per year. Your boss wants you to calculate the NPV for annual sales growth
rates of 0.0 to 0.1 in increments of 0.01; the selling price growth rate range is
0.0 to 0.10 in increments of 0.01 (i.e., 1 percent). The cost of capital is 15%.
Construct a two-way data table to generate the results.
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To generate a random number from a discrete probability distribution, you
can use VLOOKUP. Say that the random variable has the following
probability distribution:
Random Variable Probability Cumulative Probability
0 | 0.1| 0.1
1 |0.2 |0.3
2 |0.3 |0.6
3 |0.25|
4 |0.1 |
5 |0.05|
The random variable is one of the values from 0 to 5 with the probabilities
given above. The cumulative probability is the probability that the random
variable is less than or equal to that value. Thus, the cumulative probability
for random variable value 2 is the probability of 0, 1, and 2, for a total of 0.6.
To generate a random number from that probability distribution, you begin
with a number between 0 and 1. Then you check to see which interval of the
cumulative probability that the number falls into. For example, the first
interval is from zero up to 0.1 (not including 0.1) and would correspond to the
random variable value of 0. The second interval is from 0.1 (including 0.1) to
0.3 (but not including 0.3) and corresponds to a random variable value of 1.
For example, say the number is 0.25. Since 0.25 is greater than or equal to 0.1
and less than 0.3, you assign the value of 1 to the random variable. If the
number had been 0.3, you assign the value of 2 to the random variable. Use
the VLOOKUP function to assign the value of the random variable to a
number between 0 and 1. The number between 0 and 1 should be entered into
cell A5. The random variable value that is assigned should be in cell A7.
Remember that the leftmost column of the table must be the one whose values
are used to “look in” based on the first argument. Also, you may have to
restructure the table to have it work properly.
5.jpg
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