Excel Instructions for Stuff and Such

1. Enter the information in the spreadsheet below. Be sure that the information is entered in the same cells as given, or the formulas will not work. The information is the stream of costs and benefits (in millions) estimated for a proposed city baseball stadium. Year 0 represents the initial investment while costs for years 1-10 are the maintenance costs incurred at the end of each year. The benefits are the revenues from sport team contracts and revenues at the end of each year.

2. Highlight the cell range B4:D14. Open the FORMAT menu, select CELLS and Select the category CURRENCY, select the format $1,234.10. Repeat this procedure for the cell range F4:F16.

3. Highlight cell B18. Open the FORMAT menu, select CELLS and select the category

PERCENT, select two decimal places.

4. To determine the desirability of the project from an efficiency criterion, first calculate the Total Benefit for each year of the project. To do this, enter the following formula.

D4: =c4-b4

5. Copy the formula in cell D4 to the cell range D5:D14.

6. We must next discount future costs and benefits to put them into today’s value (i.e., find the present value). First, enter the following value for the discount rate (a 10% discount rate).

2

B18: 0.1

7. Second, calculate the discount factor for each year. Enter the following formula.

E4: =1/(1+$b$18)^a4

8. Copy the formula in cell E4 to the cell range E5:E14.

9. Third, multiply the total benefit for each year by the discount factor for each year.

Enter the following formula.

F4: =d4*e4

10. Copy the formula in cell F4 to the cell range F5:F14.

11. Find the Net Present Value. Add together the Present Values for each year. Enter the following formula.

F16: =sum(f4:f14)

Note: Steps 9-11 could be accomplished with one simple formula:

=sumproduct(d4:d14,e4:e14)

12. Change the discount rate and see what happens to the Net Present Value of the stadium project. With a discount rate of 7% or below, the project...