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 ? ? ? ? ? ? ? ?

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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