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
Discount rate	10%
Enter a formula into each of the cells marked with a ? below
Exhibit 14-8
		Years
	Now	1	2	3	4	5
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						?
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

You will need to key in the numbers in the "Data" section of your spreadsheet. However, all cells starting at row 19 should be referencing cells in the "Data" section and include formulas. To calculate the appropriate discount factors for cells C28 to G28 use this formula "=1/(1+(discount rate))(^ this symbol is SHIFT number 6) (number of periods- reference the applicable year row)", which in Excel will be "=1/(1+$B$13)^C18.

Verify that your worksheet matches the example in the text.

Check your worksheet by changing the discount rate to 10%. The net present value should now be between $56,400 and $56,535depending on the precision of the calculations. If you do not get an answer in this range, find the errors in your worksheet and correct them.