Chapter 14: Applying Excel Data Example E Cost of equipment needed $60,000 Working capital needed $100,000 Overhaul of equipment in four years $5,000 Salvage value of the equipment in five years $10,000 Annual revenues and costs: Sales revenues $200,000 Cost of goods sold $125,000 Out-of-pocket operating costs $35,000 14% Discount rate Enter a formula into each of the cells marked with a ? below Exhibit 14-8 Purchase of equipment Investment in working capital Sales Cost of goods sold Out-of-pocket operating costs Overhaul of equipment Salvage value of the equipment Years 5 ??? ???? Now 1 2 3 4 ? ? ? ? ? ? ? ? ? ? ? ? a Working capital released Total cash flows (a) ? ? ? Discount factor (14%) (b)* ? ? ? ?? ? ? Present value of cash flows (a) x (b) ? ? ? ? ?? ? ? ? Net present value ? "Use the formulas from Appendix 13B: Present value of $1 = 1/(1+r)^n Present value of an annuity of $1 = (1/r)*(1-(1/(1+r)^n)) where n is the number of years and r is the discount rate