Required information Excel Analytics 14-1 (Static) Internal Rate of Return [LO14-2, LO14-3] Stauffer Company has an opportunity to manufacture and sell a new product for a five-year period. The company estimated the following costs and revenues for the new product: Cost of new equipment Initial working capital required Overhaul of the equipment after three years Salvage value of the equipment after five years Annual revenues and costs: $420,000 $ 80,000 $ 50,000 $ 30,000 Sales $850,000 Variable expenses Fixed out-of-pocket operating costs. $500,000 $200,000 When the project concludes in five years the working capital will be released for investment elsewhere in the company. Click here to download the Excel template, which you will use to answer the questions that follow. Click here for a brief tutorial on Goal Seek in Excel, A13 1 2 xfx Fixed out-of-pocket operating costs A C D F G H E Blue cells can be modified 3 Discount rate 0.0% 4 5 Now 1 2 3 4 5 6 Purchase of equipment $ (420,000) 7 Investment in working capital. $ (80,000) 8 Overhaul of equipment 9 Salvage value of the equipment. 10 Working capital released 11 Sales 12 Variable expenses $ (50,000) $ 30,000 $ 80,000 $ 850,000 $ 850,000 $ 850,000 $ 850,000 $ 850,000 $ (500,000) $ (500,000) $ (500,000) $ (500,000) $ (500,000) 13 Fixed out-of-pocket operating costs $ (200,000) $ (200,000) $ (200,000) $ (200,000) $ (200,000) 14 Total cash flows (a) $ (500,000) $ 150,000 $ 15 Discount factor (b) 1.000 1.000 16 Present value of cash flows (a) x (b) $ (500,000) $ 150,000 $ 150,000 $ 1.000 150,000 $ 100,000 $ 1.000 150,000 $ 1.000 260,000 1.000 100,000 $ 150,000 $ 260,000 17 Net present value (SUM B16:G16) $ 310,000 18 Excel Analytics 14-1 (Static) Part 1 Required: 1. One method for computing the internal rate of return relies on computing the factor of the internal rate of return as shown below. Factor of the internal rate of return Investment required Annual net cash inflow Can this equation be used to calculate the internal rate of return for Stauffer Company? Why? Complete this question by entering your answers in the tabs below. Req 1A Req 18 Which of the following statements is true with respect to this equation? it can be used to calculate the internal rate of return in this instance because the net cash inflows are the same every year. Ot cannot be used to calculate the internal rate of return in this instance because the net cash inflows are not the same every year. Reg 18 > Excel Analytics 14-1 (Static) Part 1 Required: 1. One method for computing the internal rate of return relies on computing the factor of the internal rate of return as shown below: Factor of the internal rate of return Investment required. Annual net cash inflow Can this equation be used to calculate the internal rate of return for Stauffer Company? Why? Complete this question by entering your answers in the tabs below. Req 1A Req 18 1b. If this equation cannot be used to calculate the internal rate of return explain why. OBecause the net cash inflows are the same every year. OBecause the net cash inflows are not the same every year