MKM704 - Finance for Marketers - Lab 4 Solution

Year 0 1 2 3 4 5 6 7 8
($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's)

Opportunity #1
Initial Investment $2,000
Cash Flows -$2,000 $400 $600 $600 $800 $600 $300 $0 $0
Cumulative Cash Flow -$2,000 -$1,600 -$1,000 -$400 $400 $1,000 $1,300 $1,300 $1,300
Fraction Calculation n/a n/a n/a 0.5 0.7 3.3 #DIV/0! #DIV/0!
Net Present Value $200
Internal Rate of Return 16.48%
Payback Period 3.5

Opportunity #2
Initial Investment $1,000
Cash Flows -$1,000 $600 $450 $250
Cumulative Cash Flow -$1,000 -$400 $50 $300 $300 $300 $300 $300 $300
Fraction Calculation n/a 0.9 0.2 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Net Present Value $57
Internal Rate of Return 16.83%
Payback Period 1.9

Opportunity #3
Initial Investment $2,500
Cash Flows -$2,500 $200 $400 $700 $1,100 $1,800 $2,100 $2,100 $2,100
Cumulative Cash Flow -$2,500 -$2,300 -$1,900 -$1,200 -$100 $1,700 $3,800 $5,900 $8,000
Fraction Calculation n/a n/a n/a n/a 0.1 0.8 1.8 2.8
Net Present Value $2,818
Internal Rate of Return 31.13%
Payback Period 4.1

Opportunity #4
Initial Investment $1,250
Cash Flows -$1,250 $300 $450 $450 $200 $100
Cumulative Cash Flow -$1,250 -$950 -$500 -$50 $150 $250 $250 $250 $250
Fraction Calculation n/a n/a n/a 0.3 1.5 #DIV/0! #DIV/0! #DIV/0!
Net Present Value -$143
Internal Rate of Return 7.50%
Payback Period 3.3
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 MKM704 - Finance for Marketers - Lab 4 Solution
Year 0 1 2 3 4 5 6 7 8
($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's)

Opportunity #5
Initial Investment $750
Cash Flows -$750 $700 $400
Cumulative Cash Flow -$750 -$50 $350 $350 $350 $350 $350 $350 $350
Fraction Calculation n/a 0.1 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Net Present Value $183
Internal Rate of Return 33.33%
Payback Period 1.1

Opportunity #6
Initial Investment $1,000
Cash Flows -$1,000 $100 $400 $200 $700 $400 $400
Cumulative Cash Flow -$1,000 -$900 -$500 -$300 $400 $800 $1,200 $1,200 $1,200
Fraction Calculation n/a n/a n/a 0.4 1.0 2.0 #DIV/0! #DIV/0!
Net Present Value $379
Internal Rate of Return 23.58%
Payback Period 3.4

Total
Initial Investment $8,500
Cash Flows -$8,500 $2,300 $2,700 $2,200 $2,800 $2,900 $2,800 $2,100 $2,100
Cumulative Cash Flow -$8,500 -$6,200 -$3,500 -$1,300 $1,500 $4,400 $7,200 $9,300 $11,400
Fraction Calculation n/a n/a n/a 0.5 0.5 1.6 3.4 4.4
Net Present Value $3,493
Internal Rate of Return 24.21%
Payback Period 3.5

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 Student Full Name Marziya Ramakdawala Grading Scheme Maximum Points Scored
(First Name & Last Name): points

Student Number: 133278200 Project 1 Calculations 5

Course: MKM704 Project 2 Calculations 5
Section ZBB Project 3 Calculations 5
Project 4 Calculations 5
Project 5 Calculations 5
Project 6 Calculations 5
Project 7 Calculations 5
Summary & Decision 10
TOTAL 45 0

PROJECT Investment NPV IRR Payback Period Decision

Project 1 $ 2,000.00 $ 200.11 16.48% 3.50 KILL
Project 2 $ 1,000.00 $ 56.65 16.83% 1.89 KILL
Project 3 $ 2,500.00 $ 4,685.92 31.79% 5.63 YES
Project 4 $ 1,250.00 $ (143.28) 7.50% 3.25 KILL
Project 5 $ 750.00 $ 182.73 33.33% 1.13 KILL
Project 6 $ 1,000.00 $ 378.92 23.58% 3.43 YES
Project 7 $ 850.00 $ 649.90 32.44% 2.67 YES

Q1. Given that Giles can only invest $5 million, what is your recommendation to Giles, based
solely on the financial projections, of which projects the company should move forward with
and which ones will be killed?
Since Giles can only invest $5 million, according to the calculations based on internal rate of
return, net present value, payback peroid and thhe amount invested in each in projects, I would
suggest Mr Giles to forward with Project 3, Project 6 and Project 7. The amount invested in
these projects are more, though the internal rate of return in project 5 is highest and payback
period is less, it's a short term iniative project and does not give any returns in future, hence
choosing project 5 won't be appropriate for the company. Taking into account the amount
invested, the selected projects are would be beneficial to the company.
 MKM704 - Finance for Marketers - NPV IRR Lab Solution
Year 0 1 2 3 4 5 6 7 8
($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's)

Hurdle Rate 13.00%

Project 1 – $2.0 million to increase manufacturing capacity

Initial Investment $ 2,000.00
Cash Flows -$2,000 $ 400.00 $ 600.00 $ 600.00 $ 800.00 $ 600.00 $ 300.00 $ - $ -
Cumulative Cash Flow -$2,000 -$1,600 -$1,000 -$400 $400 $1,000 $1,300 $1,300 $1,300
Net Present Value $ 200.11
Internal Rate of Return 16.48%
Payback Period 3.50

Project 2 - $1.0 million on an integrated marketing campaign to promote the sport of archery
Initial Investment $ 1,000.00
Cash Flows -$1,000 $ 600.00 $ 450.00 $ 250.00 $ - $ - $ - $ - $ -
Cumulative Cash Flow -$1,000 -$400 $50 $300 $300 $300 $300 $300 $300
Net Present Value $ 56.65
Internal Rate of Return 16.83%
Payback Period 1.89

Project 3 - $2.5 million to expand into high potential Sunnydale market

Perpetuity Growth Rate 1.00%
Initial Investment $ 2,500.00
Cash Flows -$2,500 $ 100.00 $ 200.00 $ 250.00 $ 400.00 $ 800.00 $ 1,200.00 $ 1,300.00 $ 1,400.00
Cumulative Cash Flow -$2,500 -$2,400 -$2,200 -$1,950 -$1,550 -$750 $450 $1,750 $3,150
Terminal Value $11,783
Cash flow + Terminal Value -$2,500 $100 $200 $250 $400 $800 $1,200 $1,300 $13,183
Net Present Value $4,685.92 $4,685.92
Internal Rate of Return 31.79%
Payback Period 5.63

Project 4 - $1.25 million to launch line extension à Mr. Pointy Super-Arrow

Initial Investment $ 1,250.00
Cash Flows -$1,250 $ 300.00 $ 450.00 $ 450.00 $ 200.00 $ 100.00 $ - $ - $ -
Cumulative Cash Flow -$1,250 -$950 -$500 -$50 $150 $250 $250 $250 $250
Net Present Value $ (143.28)
Internal Rate of Return 7.50%
Payback Period 3.25

Project 5 - $0.75 million for extensive digital media campaign

Initial Investment $ 750.00
Cash Flows -$750 $ 700.00 $ 400.00 $ - $ - $ - $ - $ - $ -
Cumulative Cash Flow -$750 -$50 $350 $350 $350 $350 $350 $350 $350
Net Present Value $ 182.73
Internal Rate of Return 33.33%
Payback Period 1.13

Project 6 - $1.0 million for World Championship of Archery Olympic Sponsorship for 6 years
Initial Investment $ 1,000.00
Cash Flows -$1,000 $ 100.00 $ 400.00 $ 200.00 $ 700.00 $ 400.00 $ 400.00 $ - $ -
Cumulative Cash Flow -$1,000 -$900 -$500 -$300 $400 $800 $1,200 $1,200 $1,200
Net Present Value $ 378.92
Internal Rate of Return 23.58%
Payback Period 3.43

Project 7 - $0.85 million to renovate and expand The Bronze sports Bar
Perpetuity Growth Rate -10.00%
Initial Investment $ 850.00
Cash Flows -$850 $ 350.00 $ 300.00 $ 300.00 $ 250.00 $ 250.00 $ 200.00 $ 200.00 $ 150.00
Cumulative Cash Flow -$850 $ (500.00) $ (200.00) $ 100.00 $ 350.00 $ 600.00 $ 800.00 $ 1,000.00 $ 1,150.00
Terminal Value $ 586.96
Cash flow + Terminal Value $ (850.00) $ 350.00 $ 300.00 $ 300.00 $ 250.00 $ 250.00 $ 200.00 $ 200.00 $ 736.96
Net Present Value $649.90
Internal Rate of Return 32.44%
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 MKM704 - Finance for Marketers - NPV IRR Lab Solution
Year 0 1 2 3 4 5 6 7 8
($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's)
Payback Period 2.67

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 MKM704 - Finance for Marketers - Lab 4

Determine the missing Interest Rate Number of Present Future Value Payment
value: Payments Value
0.25% 278 $300,000 n/a -$1,500.00
1.00% 360 n/a -$1,013,540 $290.00
1.00% 48 $13,671 n/a -$360.00
3.00% 120 $5,000 n/a -$154.45
2.73% 36 $25,000 n/a -$1,100.00

How long will it take for your money to double?

Interest Rate 2% 4% 6% 8% 10%
Number of Periods -
payment at end of 35 18 12 9 7
period (default setting)

Hint: NPER(rate, payment, pv,[fv],[type])

[fv] = optional argument of future value (enter as negative)
[type] = optional argument with 0 = payment at end of period OR 1 = payment at start of period

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 MRK 519 - Marketing Metrics - Lab 5 Solution
Year 0 1 2 3 4 5 6 7 8
($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's)

Opportunity #1
Initial Cash Flow -2000
Cash Flows -$2,000 $400 $600 $600 $800 $600 $300
Net Present Value $200
Internal Rate of Return 16.48%
Cumulative Cash Flow -2000.0 -$1,600 -$1,000 -$400 $400 $1,000 $1,300 $1,300 $1,300
Payback Period -0.50

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 MRK 519 - Marketing Metrics - Lab 5 Solution
Year 0 1 2 3 4 5 6 7 8
($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's) ($'000's)

Opportunity #1
Initial Cash Flow -2000
Cash Flows -$2,000 $400 $600 $600 $800 $600 $300
Cumulative Cash Flow -$2,000 -$1,600 -$1,000 -$400 $400 $1,000 $1,300 $1,300 $1,300
Net Present Value $200
Internal Rate of Return 16.48%
Payback Period -0.50

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