Chapter 13: Applying Excel: Exercise (Part 2 of 2)

2. The company is considering a project involving the purchase of new equipment. Change the data area of your worksheet to match the following: Use Exhibit 13B-1 and Exhibit 13B-2. (Use appropriate factor(s) from the tables provided.)

A. What is the net present value of the project? (Negative amount should be indicated by a minus sign. Round your present value factor to 3 decimals and round all other intermediate calculations to nearest whole dollar.)

B. The internal rate of return is between what two whole discount rates (e.g., between 10% and 11%, between 11% and 12%, between 12% and 13%, between 13% and 14%, etc.)?

C. Reset the discount rate to 12%. Suppose the salvage value is uncertain. How large would the salvage value have to be to result in a positive net present value?

1 Chapter 13: Applying Excel $ 3 Data 4 Example E 5 Cost of equipment needed 6 Working capital needed 7 Overhaul of equipment in four years 8 Salvage value of the equipment in five years 9 Annual revenues and costs: 10 Sales revenues 11 Cost of goods sold 12 Out-of-pocket operating costs 13 Discount rate 420,000 55,000 40,000 35,000 $ $ $ $ 420,000 225,000 75,000 12 %