A B 1 Chapter 14: Applying Excel 2 3 Data Example E Cost of equipment needed 4 340,000 Working capital needed 40,000 7 Overhaul of equipment in four years 30,000 Salvage value of the equipment in five years 20.000 Annual revenues and costs: Sales revenues 400,000 10 Cost of goods sold 245.000 11 Out-of-pocket operating costs 65,000 12 Discount rate 13 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 declmals and round all other Intermedlate calculatlons 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.)? The internal rate of return is between and 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? Minimum salvage value required to generate a positive present value
A B 1 Chapter 14: Applying Excel 2 3 Data Example E Cost of equipment needed 4 340,000 Working capital needed 40,000 7 Overhaul of equipment in four years 30,000 Salvage value of the equipment in five years 20.000 Annual revenues and costs: Sales revenues 400,000 10 Cost of goods sold 245.000 11 Out-of-pocket operating costs 65,000 12 Discount rate 13 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 declmals and round all other Intermedlate calculatlons 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.)? The internal rate of return is between and 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? Minimum salvage value required to generate a positive present value
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A
B
1
Chapter 14: Applying Excel
2
3
Data
4
Example E
5
Cost of equipment needed
340,000
6.
Working capital needed
40,000
Overhaul of equipment in four years
30.000
7
Salvage value of the equipment in five years
20,000
Annual revenues and costs:
9
Sales revenues
400,000
10
Cost of goods sold
245.000
11
Out-of-pocket operating costs
65.000
12
Discount rate
10 %
13
a. What is the net present value of the project? (Negatlve amount should be Indlicated by a mlnus sign. Round your present value
factor to 3 declmals and round all other Intermedlate calculatlons 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.)?
The internal rate of return is between
%
and
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?
Minimum salvage value required to generate a positive present value
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