*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

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	14%

AutoSave@prr kD d5 S R Document2 Q Search in Document Home Insort Dosign Layout Roferencos Mailings Roviow Viow Table Design Layout Share Spacing :|:: Before: 10pt Atter: 0pt Line Numbers Indent Left: | 0.03. Margins Position Wrap Bring Send Selection Align Group Rotate Rignt: Text Forward Backward Pane Enter a formula into each of the cells marked with a 2 below. Be sure to format the colls appropriatey, For exampie, if the coll has a dollar amount in it, then the cell shound be formatted for dolars. Exhibit 13-6 Now S 60,000 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) 00,000 200,000 5 125,000 125,000 125,000 S 125,000 S 35,000 35,000 S 35,000 S35,000 $ 5,000 S 200.000 S200,000 200,000 S S 200,000 S 125,000 S 35,000 s a aco Total cash Discount factor (14%) (b) Present value of cash lows (a) x (o) Nct prosent valuc Page 1 of 1 151 words English (United States -- Focus- + 110%