3 Data 4 Example E 5 Cost of equipment needed Working capital needed 7Overhaul of equipment in four years 8 Salvage value of the equipment in five years 9 Annual revenues and costs $60,000 S100,000 $5,000 S10,000 10 Sales revenues S200,000 $125,000 S35,000 11 Cost of goods sold 12 Out-of-pocket operating costs 13 Discount rate 15 Enter a formula into each of the cells marked with a? below 16 Exhibit 13-8 17 Years 18 19 Purchase of equipment 20 Investment in working capital 21 Sales Cost of goods sold 23 Out-of-pocket operating costs 24 Overhaul of equipment 25 Salvage value of the equipment 26 Working capital released 27 Total cash flows (a) 28 Discount factor (14%)(b) 2 2 2 2 29 Present value of cash flows (a) x (b) 30 Net present value 31 32 Use the formulas from Appendix 13B: 33 Present value of $1 1/(1+r)n 34 Present value of an annuity of $1 (1/(1-(1/(1+rn) 35 where n is the number of years and r is the discount rate 36 37 38