Excel TVM functions

The Acme Company has its European subsidiary based in the Euro zone. The subsidiary must solve a

series of five problems that require you to apply the concept of “time value of money,” or TVM. The

five problems are listed below. Solving them will require the use of Microsoft Excel. Before you

begin your work, each student is to select a unique nine-digit random number that contains no

zeros, no “patterns,” and should use most of the digits between one and nine. This value will be

referred to as the student unique number (SUN). Further, digits within the SUN are read from left to

right. For example, if the SUN = 123456789, the first digit = 1, the second digit = 2, etc. You are not

authorized to use 123456789. To generate a random whole number between 1 and 9, use this excel

formula:

=round(8*rand(),0)+1

When you have generated these 9 digits, paste them back onto themselves using the Paste Values

option of the Paste command.Please note that the interest rate used in all questions represents an

annual rate and all Euro figures are in whole Euros (not Euros and cents).

Acme plans to construct a new manufacturing facility in 14 years. If Acme estimates that today’s

cost of the new plant is SUN Euros (use all 9 digits) and annual inflation is A% (A = the first digit of

SUN), how much will the manufacturing plant cost in 14 years? Give a detailed explanation on your

calculations.
Acme has decided to establish a sinking fund for its outstanding preferred stock issue. SUN (use all

9 digits) represents the amount of the issue that will be retired in 26 years. At the beginning of

each of these 26 years, Acme will deposit an equal amount into an account that earns B% (B = the

second digit of SUN). What is the value of this periodic deposit? Give a detailed explanation on

your calculations.
One of Acme’s new projects will generate the following cash flows at the end of each of the stated

years: year 2 = SUN digits 1-3; year 4 = SUN digits 4-6; year 7 = SUN digits 7-9. If these cash flows are

discounted at 12%, what is the sum of their present values? Give a detailed explanation on your

calculations.
Acme is assessing its employee pension fund. At the end of each of the next 25 years Acme will

have to pay its retirees (use the first 4 digits of your SUN). If the fund is estimated to earn D% (D =

the fourth digit of SUN), how much does Acme need to have set aside today to ensure that it can

meet its future obligations? (At the end of the 25th year, the balance should be drawn down to

zero.) Give a detailed explanation on your calculations.
As part of a new labor contract, Acme has agreed to make a one-time contribution of Euros

1,000,000 to the construction of a new physical fitness facility for its employees. This amount will

be placed in an account earning E% (E = the fifth digit of SUN). When the account grows to Euros

1,850,000, construction will commence. How long must employees wait until construction of their

new gym begins? (Your answer should be accurate to two decimal places, e.g., 1.57 years). Give a

detailed explanation on your calculations.
Prepare for Acme’s CFO an analysis that contains solutions for all five problems. Be sure to clearly

present and label all values and variables, provide Excel TVM formulas, and conclude each question

with a detailed interpretation of your results. Your entire submission must be contained within an

Excel document. (Note: You must use Excel TVM functions to complete this assignment; using a

hand calculator or website and plugging values into a template is not acceptable.) Note: The books

of the subsidiary being held in Euros, the exchange rate Euro/US dollars has no influence on the

result of the exercise.

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