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2 Laurman, Inc. is considering the following project: 4 Required investment in equipment 5 Project life 6 Salvage value 7 8 The project would provide net operating income each year as follows: 9 Sales 10 Variable expenses 11 Contribution margin 12 Fised expenses: 13 Salaries, rent and other fixed out-of pocket costs 14 Depreciation 15 Total fixed expenses 16 Net operating income. 17 18 Company discount rate $2,205,000 7 225,000 $2,750,000 1,600,000 $1,150,000 $520,000 350,000 870,000 $280.000 18% D N 19 20 Required: 21 22 23 (Use cells A4 to C18 from the given information, as well as 824, and A30 to D45 to complete this question. Negative amounts or amounts to be deducted should be input as negative values and will display in parentheses.) 24 1. Compute the annual net cash inflow from the project. $630,000 25 26 2. Complete the table to compute the net present value of the investment. 27 28 Year(s) 29 Now 152,205,000.00) 1 through 7 30 Initial investment 31 Annual cost savings 32 Salvage value of the new machine 33 Total cash flows 34 Discount factor 35 Present value of the cash flows 36 Net present value 37 38 Use Excel's PV function to compute the present value of the future cash flows 39 Deduct the cost of the investment 40 Net present value 41 42 3. Use Excel's RATE function to compute the project's internal rate of return 43 44 4. Compute the project's payback period. 152,205,000.00) 1.00000 152,205,000.001 -$2,205,000.00 $630,000.00 $630,000.00 0.00000 50.00 F $225,000.00 $225,000.00 0.00000 You must use the -PV function in your formula 50.000 50.00 You must use the -PV function in your formula 152,205,000.00) 50.00 0.00% You must use the -RATE function in your formula 3.5 years

2 Laurman, Inc. is considering the following project: 4 Required investment in equipment 5 Project life 6 Salvage value 7 8 The project would provide net operating income each year as follows: 9 Sales 10 Variable expenses 11 Contribution margin 12 Fised expenses: 13 Salaries, rent and other fixed out-of pocket costs 14 Depreciation 15 Total fixed expenses 16 Net operating income. 17 18 Company discount rate $2,205,000 7 225,000 $2,750,000 1,600,000 $1,150,000 $520,000 350,000 870,000 $280.000 18% D N 19 20 Required: 21 22 23 (Use cells A4 to C18 from the given information, as well as 824, and A30 to D45 to complete this question. Negative amounts or amounts to be deducted should be input as negative values and will display in parentheses.) 24 1. Compute the annual net cash inflow from the project. $630,000 25 26 2. Complete the table to compute the net present value of the investment. 27 28 Year(s) 29 Now 152,205,000.00) 1 through 7 30 Initial investment 31 Annual cost savings 32 Salvage value of the new machine 33 Total cash flows 34 Discount factor 35 Present value of the cash flows 36 Net present value 37 38 Use Excel's PV function to compute the present value of the future cash flows 39 Deduct the cost of the investment 40 Net present value 41 42 3. Use Excel's RATE function to compute the project's internal rate of return 43 44 4. Compute the project's payback period. 152,205,000.00) 1.00000 152,205,000.001 -$2,205,000.00 $630,000.00 $630,000.00 0.00000 50.00 F $225,000.00 $225,000.00 0.00000 You must use the -PV function in your formula 50.000 50.00 You must use the -PV function in your formula 152,205,000.00) 50.00 0.00% You must use the -RATE function in your formula 3.5 years

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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2 Laurman, Inc. is considering the following project: 4 Required investment in equipment 5 Project life 6 Salvage value 7 8 The project would provide net operating income each year as follows: 9 Sales 10 Variable expenses 11 Contribution margin 12 Fised expenses: 13 Salaries, rent and other fixed out-of pocket costs 14 Depreciation 15 Total fixed expenses 16 Net operating income. 17 18 Company discount rate $2,205,000 7 225,000 $2,750,000 1,600,000 $1,150,000 $520,000 350,000 870,000 $280.000 18% D N 19 20 Required: 21 22 23 (Use cells A4 to C18 from the given information, as well as 824, and A30 to D45 to complete this question. Negative amounts or amounts to be deducted should be input as negative values and will display in parentheses.) 24 1. Compute the annual net cash inflow from the project. $630,000 25 26 2. Complete the table to compute the net present value of the investment. 27 28 Year(s) 29 Now 152,205,000.00) 1 through 7 30 Initial investment 31 Annual cost savings 32 Salvage value of the new machine 33 Total cash flows 34 Discount factor 35 Present value of the cash flows 36 Net present value 37 38 Use Excel's PV function to compute the present value of the future cash flows 39 Deduct the cost of the investment 40 Net present value 41 42 3. Use Excel's RATE function to compute the project's internal rate of return 43 44 4. Compute the project's payback period. 152,205,000.00) 1.00000 152,205,000.001 -$2,205,000.00 $630,000.00 $630,000.00 0.00000 50.00 F $225,000.00 $225,000.00 0.00000 You must use the -PV function in your formula 50.000 50.00 You must use the -PV function in your formula 152,205,000.00) 50.00 0.00% You must use the -RATE function in your formula 3.5 years
Transcribed Image Text:2 Laurman, Inc. is considering the following project: 4 Required investment in equipment 5 Project life 6 Salvage value 7 8 The project would provide net operating income each year as follows: 9 Sales 10 Variable expenses 11 Contribution margin 12 Fised expenses: 13 Salaries, rent and other fixed out-of pocket costs 14 Depreciation 15 Total fixed expenses 16 Net operating income. 17 18 Company discount rate $2,205,000 7 225,000 $2,750,000 1,600,000 $1,150,000 $520,000 350,000 870,000 $280.000 18% D N 19 20 Required: 21 22 23 (Use cells A4 to C18 from the given information, as well as 824, and A30 to D45 to complete this question. Negative amounts or amounts to be deducted should be input as negative values and will display in parentheses.) 24 1. Compute the annual net cash inflow from the project. $630,000 25 26 2. Complete the table to compute the net present value of the investment. 27 28 Year(s) 29 Now 152,205,000.00) 1 through 7 30 Initial investment 31 Annual cost savings 32 Salvage value of the new machine 33 Total cash flows 34 Discount factor 35 Present value of the cash flows 36 Net present value 37 38 Use Excel's PV function to compute the present value of the future cash flows 39 Deduct the cost of the investment 40 Net present value 41 42 3. Use Excel's RATE function to compute the project's internal rate of return 43 44 4. Compute the project's payback period. 152,205,000.00) 1.00000 152,205,000.001 -$2,205,000.00 $630,000.00 $630,000.00 0.00000 50.00 F $225,000.00 $225,000.00 0.00000 You must use the -PV function in your formula 50.000 50.00 You must use the -PV function in your formula 152,205,000.00) 50.00 0.00% You must use the -RATE function in your formula 3.5 years
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