For example, in cell C22 enter the formula "= B10".

Note: The present value factors could be computed using the built-in Excel function PV, but we recommend using the formulas in Appendix 13B.

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 $56,518 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.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

rev: 11_08_2017_QC_CS-108759

PLEASE SHOW EXCEL FORMULAS

0 Chapter 13: Applying Excel Data Example E Cost of equipment needed Working capital needed Overhaul of equipment in four years Salvage value of the equipment in five years Annual revenues and costs $60,000 100,000 $5,000 $10,000 $200,000 $125,000 $35,000 14% 0 Sales revenues Cost of goods sold 12 13 14 15 16 17 18 19 20 Out-of-pocket operating costs Discount rate Enter a fomula into each of the cells marked with a ? below Exhibit 13-8 Years Now 2 4 5 Purchase of equipment OInvestment in working capital 21 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) 23 24 25 26 27 28 29 30 Net present value 31 32 Use the formulas from Appendix 1 Present value of $1-1/(1+r n Present value of an annuity of $1(1)(1-(1/(1+rn)) where n is the number of vears and r is the discount rate 34 35 36 37 38 Chapter 13 Form 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.) 1 Chapter 13: Applying Excel 2 3 Data 4 Example E 5 Cost of equipment needed 6 Working capital needed $230,000 $60,000 $ 20,000 $ 25,000 Overhaul of equipment in four years 8 Salvage value of the equipment in five years 9 Annual revenues and costs 10 Sales revenues 11Cost of goods sold 12Out-of-pocket operating costs 13 Discount rate $365,000 $235,000 55,000 16% 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.) Net present value c. 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.)? % and The internal rate of return is between d. Reset the discount rate to 16%. Suppose the salvage value is uncertain. How large would the salvage value have to be to result in a positive net present value? Minimum salvage value required to generate a positive present value