GETTING STARTED

·               Open the file NP_EX19_9b_FirstLastName_1.xlsx, available for download from the SAM website.

·               Save the file as NP_EX19_9b_FirstLastName_2.xlsx by changing the “1” to a “2”.

o      If you do not see the .xlsx file extension in the Save As dialog box, do not type it. The program will add the file extension for you automatically.

·               With the file NP_EX19_9b_FirstLastName_2.xlsx still open, ensure that your first and last name is displayed in cell B6 of the Documentation sheet.

o      If cell B6 does not display your name, delete the file and download a new copy from the SAM website.

      PROJECT STEPS

1.        Hwan Rhee is considering whether to start a software company called Charge All in Menlo Park, California, that will produce full-room wireless chargers for any type of mobile electronic device. Hwan is using an Excel workbook to analyze the financial data for a startup loan that will fund the parts and manufacturing of his product. He asks for your help in correcting errors and making financial calculations in the workbook.
Go to the Loan Analysis worksheet. Before Hwan can calculate the principal and interest payments on the loan, he asks you to correct the errors in the worksheet. Correct the first error as follows:

a.        In cell D11, use the Error Checking command to identify the error in the cell.

b.        Correct the error to calculate the monthly payment for the loan.

2.        Correct the #DIV/0! errors in the worksheet as follows:

a.        Use Trace Precedents arrows to find the source of the #DIV/0! error in cell G12.

b.        Correct the formula in cell G12, which should divide the remaining principal (cell G11) by the loan amount (cell D6) to find the percentage of remaining principal.

c.        Fill the range H12:K12 with the formula in cell G12 to correct the remaining #DIV/0! errors.

d.        Remove any remaining trace arrows.

3.        Now Hwan is ready to calculate the annual principal and interest payments for the startup loan. Start by calculating the cumulative interest payments as follows:

a.        In cell G9, enter a formula using the CUMIPMT function to calculate the cumulative interest paid on the loan for Year 1 (payment 1 in cell G7 through payment 12 in cell G8). Use 0 as the type argument in your formula because payments are made at the end of the period.

b.        Use absolute references for the rate, nper, and pv arguments, which are listed in the range D6:D12.

c.        Use relative references for the start and end arguments.

d.        Fill the range H9:K9 with the formula in cell G9 to calculate the interest paid in Years 2–5 and the total interest.

4.        Calculate the cumulative principal payments as follows:

a.        In cell G10, enter a formula using the CUMPRINC function to calculate the cumulative principal paid for Year 1 (payment 1 in cell G7 through payment 12 in cell G8). Use 0 as the type argument in your formula because payments are made at the end of the period.

b.        Use absolute references for the rate, nper, and pv arguments, which are listed in the range D6:D12.

c.        Use relative references for the start and end arguments.

d.        Fill the range H10:K10 with the formula in cell G10 to calculate the principal paid in Years 2–5 and the total principal.

5.        Go to the Depreciation worksheet. Hwan needs to correct the errors on this worksheet before he can perform any depreciation calculations.
Correct the errors as follows:

a.        Use Trace Dependents arrows to determine whether the #VALUE! error in cell D20 is causing the other errors in the worksheet.

b.        Use Trace Precedents arrows to find the source of the error in cell D20.

c.        Correct the error so that the formula in cell D20 calculates the cumulative declining balance depreciation of the hardware by adding the cumulative depreciation value in Year 1 to the annual depreciation value in Year 2.

6.        Hwan wants to compare straight-line depreciation amounts with declining balance depreciation amounts to determine which method is more favorable for his company's balance sheet. In the range D6:D8, he estimates that the hardware for the new product will have $478,000 in tangible assets at startup, and that the useful life of these assets is six years with a salvage value of $75,650.
Start by calculating the straight-line depreciation amounts as follows:

a.        In cell C12, enter a formula using the SLN function to calculate the straight-line depreciation for the product hardware during the first year.

b.        Use absolute references for the cost, salvage, and life arguments in the SLN formula.

c.        Fill the range D12:H12 with the formula in cell C12 to calculate the annual and cumulative straight-line depreciation in Years 2–6.