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Chapter 13: Applying Excel

The Chapter 13 Form worksheet is to be used to your own worksheet version of Example E andExhibit 13-8in the text.

rev: 06_21_2019_QC_CS-167141

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: UseExhibit 13B-1andExhibit 13B-2.(Use appropriate factor(s) from the tables provided.)

Cost of equipment needed 320,000

Working capital needed 30,000

Overhaul of equipment in 4 years 25,000

Salvage value of equipment in five years 25,000

Annual revenue and costs:

Sales Revenue 385,000

Cost of good sold 245,000

Out of pocket operating costs 60,000

Discount rate 10%

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.)

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.)?

d. Reset the discount rate to 10%. Suppose the salvage value is uncertain. How large would the salvage value have to be to result in a positive net present value?