Chapter 7: Applying Excel Data Example E Cost of equipment needed Working capital needed Overhaul of equipment in four years Salvage value of the equipment in five years Annual revenues and costs: Sales revenues Cost of goods sold Out-of-pocket operating costs Discount rate 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) $120,000 $80,000 $40,000 $20,000 Enter a formula into each of the cells marked with a ? below Exhibit 7-8 Discount factor (14%) (b) Present value of cash flows (a) x (b) Net present value $255,000 $160,000 $50,000 14% Now *Use the formulas from Appendix 7B: 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 ? ? ? ? ? ? ? ? ? ? ? ? 2 ? ? ? ? ? ? Years 3 ? ? ? ? ? ? 4 ? ? ? ? ? ? ? 5 ? ? ? ? ? ? ? ?
Chapter 7: Applying Excel Data Example E Cost of equipment needed Working capital needed Overhaul of equipment in four years Salvage value of the equipment in five years Annual revenues and costs: Sales revenues Cost of goods sold Out-of-pocket operating costs Discount rate 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) $120,000 $80,000 $40,000 $20,000 Enter a formula into each of the cells marked with a ? below Exhibit 7-8 Discount factor (14%) (b) Present value of cash flows (a) x (b) Net present value $255,000 $160,000 $50,000 14% Now *Use the formulas from Appendix 7B: 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 ? ? ? ? ? ? ? ? ? ? ? ? 2 ? ? ? ? ? ? Years 3 ? ? ? ? ? ? 4 ? ? ? ? ? ? ? 5 ? ? ? ? ? ? ? ?
Chapter1: Financial Statements And Business Decisions
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
Transcribed Image Text:Requirement 1
Chapter 7: Applying Excel
Requirement 2a
Data
Example E
Cost of equipment needed
Working capital needed
Overhaul of equipment in four years
Salvage value of the equipment in five years
Annual revenues and costs:
Sales revenues
Cost of goods sold
Out-of-pocket operating costs
Discount rate
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)
Discount factor (14%) (b)
Present value of cash flows (a) x (b)
Net present value
$120,000
$80,000
$40,000
$20,000
$255,000
$160,000
$50,000
14%
Enter a formula into each of the cells marked with a ? below
Exhibit 7-8
Now
*Use the formulas from Appendix 7B:
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
?
?
?
?
?
?
1
Requirement 2 b
?
?
?
?
?
?
2
?
?
?
?
?
?
Years
3
?
?
?
?
?
?
Requirement 2 c
4
?
?
?
?
?
?
?
5
?
?
?
?
?
?
?
?
F
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