DAYSTAR COMPANY

PROJECT INVESTMENT DECISION

INPUT SECTION

Capital budget $1,000

WACC 10%

Project Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

A -$140 $55 $55 $55 $100 $100
B -$300 $100 $120 $130 $130 $100
C -$450 $390 -$100 -$193 $350 $460
D -$300 $134 $134 $134 $134 $134
E -$450 $202 -$210 $350 $350 $450

REPORT SECTION

Project Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 NPV Decision

A -$140 $55 $55 $55 $100 $100 $127.17 Invest
B -$300 $100 $120 $130 $130 $100 $138.64 Invest
C -$450 $390 -$100 -$193 $350 $460 $201.58 Invest
D -$300 $134 $134 $134 $134 $134 $207.97 Invest
E -$450 $202 -$210 $350 $350 $450 $341.51 Invest
This model is built to calculate the NPV for 5 projects A, B, C, D, E to
help Daystar make decision on which projects should be invested to
gain profit.
If the NPV is positive, the decision will be "invest". If it is negative,
the decision will be "reject".
DAYSTAR COMPANY

PROJECT INVESTMENT DECISION

WACC 10%

Table 1: Project A sensitivity Table 3: Project C sen

Project Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 NPV Project

A -$140 $55 $55 $55 $100 $100 $127.17 C

NPV
$127.17
5% $170.40
6% $160.95
7% $151.93
8% $143.30
9% $135.06
WACC

WACC
10% $127.17
11% $119.62
12% $112.40
13% $105.47
14% $98.83
15% $92.47

Table 2: Project B sensitivity Table 4: Project D sen

Project Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 NPV Project

B -$300 $100 $120 $130 $130 $100 $138.64 D

NPV
$138.64
5% $201.68
6% $187.99
7% $174.86
8% $162.28
9% $150.22
WACC

WACC

10% $138.64
11% $127.52
12% $116.84
13% $106.58
14% $96.71
15% $87.22
Table 5: Project E sensitivity

Project Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 NPV

E -$450 $202 -$210 $350 $350 $450 $341.51

NPV
$341.51
5% $494.78
6% $461.03
7% $428.92
8% $398.36
9% $369.25
WACC

10% $341.51
11% $315.07
12% $289.84
13% $265.77
14% $242.79
15% $220.84
 This model is used to analyze
the sensitivity of each
project's NPV if the WACC
changes from 5% to 15%

Table 3: Project C sensitivity

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 NPV

-$450 $390 -$100 -$193 $350 $460 $201.58

NPV
$201.58
5% $312.37
6% $287.85
7% $264.58
8% $242.50
9% $221.52
10% $201.58
11% $182.61
12% $164.57
13% $147.39
14% $131.03
15% $115.43

Table 4: Project D sensitivity

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 NPV

-$300 $134 $134 $134 $134 $134 $207.97

NPV
$207.97
5% $280.15
6% $264.46
7% $249.43
8% $235.02
9% $221.21
10% $207.97
11% $195.25
12% $183.04
13% $171.31
14% $160.03
15% $149.19
Microsoft Excel 14.0 Answer Report
Worksheet: [ASSIGNMENT 2_GROUP 101_291018.xlsx]OPTIMIZATION MODEL
Report Created: 10/28/2018 5:43:28 PM
Result: Solver found a solution. All Constraints and optimality conditions are satisfied.
Solver Engine
Engine: Simplex LP
Solution Time: 0.016 Seconds.
Iterations: 1 Subproblems: 6
Solver Options
Max Time Unlimited, Iterations Unlimited, Precision 0.000001, Use Automatic Scaling
Max Subproblems Unlimited, Max Integer Sols Unlimited, Integer Tolerance 1%, Assume NonNegative

Objective Cell (Max)

Cell Name Original Value Final Value
$H$12 NPV Total $676.65 $676.65

Variable Cells
Cell Name Original Value Final Value Integer
$C$8 Invest A 1 1 Binary
$D$8 Invest B 0 0 Binary
$E$8 Invest C 0 0 Binary
$F$8 Invest D 1 1 Binary
$G$8 Invest E 1 1 Binary

Constraints
Cell Name Cell Value Formula Status Slack
$H$16 Cost Result $890 $H$16<=$J$16 Not Binding 110
$C$8:$G$8=Binary
DAYSTAR COMPANY

PROJECT INVESTMENT DECISION

DECISIONS
Project A B C D E
Invest 1 0 0 1 1

OBJECTIVES
Project A B C D E Total
NPV $127.17 $138.64 $201.58 $207.97 $341.51 $676.65

CONSTRAINTS
Project A B C D E Result Condition
Cost $140 $300 $450 $300 $450 $890 <= $1,000
 All of 5 projects have positive NPV. Their initial costs are
illustrated below.
This model is used to make the decision that which projects
should the company invest in to maximize the benefit with the
constraint $1,000 capital budget.

Note
Satisfied
Scenario Summary
Current Values: Base case Bad case Good case
Changing Cells:
WACC 10% 10% 15% 5%
Result Cells:
Total NPV $676.65 $676.65 $462.50 $945.33
Notes: Current Values column represents values of changing cells at
time Scenario Summary Report was created. Changing cells for each
scenario are highlighted in gray.