2. The company is considering a project involving the purchase of new equipment. Change the data area of your worksheet to match the following: Use Exhibit 13B-1 and Exhibit 13B-2. (Use appropriate factor(s) from the tables provided.) A B 1 Chapter 13: Applying Excel 2 3 4 5 $ 6 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: $ 220,000 30,000 15,000 25,000 7 $ 8 $ 9 10 Sales revenues $ 11 $ 12 Cost of goods sold Out-of-pocket operating costs Discount rate 380,000 245,000 80,000 11 % $ 13 EXHIBIT 13-8 The Net Present Value MethodAn Extended Example 4 B D E F G 1 Year 2. Now 1 2 3 4 5 3 Purchase of equipment $ 160,000) Investment in working capital $ (100,000) 5 Sales $ 200,000 $ 200,000 $ 200,000 $ 200,000 $ 200,000 6 Cost of goods sold $(125,000) $ (125,000) $(125,000) $(125,000) $(125,000) 7 Out-of-pocket costs for salaries, advertising, etc. (35,000) $ (35,000) $ (35,000) $ (35,000) $ (35,000) 8 Overhaul of equipment $ (5,000) 9 Salvage value of the equipment $ 10,000 10 Working capital released $ 100,000 11 Total cash flows (a) $ (160,000) $ 40,000 $40,000 $ 40,000 $ 35,000 $ 150,000 12 Discount factor (14%) (b) 1.000 0.877 0.769 0.675 0.592 $ 0.519 13 Present value of cash flows (a) x (b) $ (160,000) $ 35,080 $ 30,760 $ 27,000 $ 20,720 $ 77,850 14 Net present value (SUM B13:613) $ 31,410 15 16 Note: The discount factors come from Exhibit 13B-1 in Appendix 13B. 17 HON Exhibit 13-3 Exhibit 13-4 Exhibit 13-5 Exhibit 13-6 Exhibit 13-7 Exhibit 13-8 Exhibiti 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 decimals and round all other intermediate calculations to nearest whole dollar.) Net present value $ (695,575) 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 10 % and 12 % d. Reset the discount rate to 11%. 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 $ 13