Data Example E Cost of equipment needed Working capital needed Overhaul of equipment in four years Salvage value of the equipment in five years $60,000 $100,000 $5,000 $10,000

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
$60,000
$100,000
$5,000
$10,000
Enter a formula into each of the cells marked with a ? below
Exhibit 7-8
$200,000
$125,000
$35,000
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
?
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?
1
Requirement 2 b
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?
?
2
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?
?
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Years
3
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?
Requirement 2 c
4
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?
5
?
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?|
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?
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 $60,000 $100,000 $5,000 $10,000 Enter a formula into each of the cells marked with a ? below Exhibit 7-8 $200,000 $125,000 $35,000 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 ? ? ? ? ? ? 1 Requirement 2 b ? ? ? ? ? ? 2 ? ? ? ? ? ? Years 3 ? ? ? ? ? ? Requirement 2 c 4 ? ? ? ? ? ? ? 5 ? ? ? ? ?| ? ? ? F
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