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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: $120,000 $80,000 $40,000 $20,000

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: $120,000 $80,000 $40,000 $20,000

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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Requirement 1 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 Requirement 2a 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 Enter a formula into each of the cells marked with a ? below Exhibit 7-8 $255,000 $160,000 $50,000 10% 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
Transcribed Image Text:Requirement 1 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 Requirement 2a 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 Enter a formula into each of the cells marked with a ? below Exhibit 7-8 $255,000 $160,000 $50,000 10% 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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