\fData 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 14% Enter a formula into each of the cells marked with a ? below Exhibit 12-8 Years Now 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\f