Question
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
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 14B-1 and Exhibit 14B-2. (Use appropriate factor(s) from the tables provided.)
Chapter 14: Applying Excel | ||
Data | ||
Example E | ||
Cost of equipment needed | $420,000 | |
Working capital needed | $55,000 | |
Overhaul of equipment in four years | $30,000 | |
Salvage value of the equipment in five years | $40,000 | |
Annual revenues and costs: | ||
Sales revenues | $440,000 | |
Cost of goods sold | $245,000 | |
Out-of-pocket operating costs | $80,000 | |
Discount rate | 12 | % |
. 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.)
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.)?
d. Reset the discount rate to 12%. Suppose the salvage value is uncertain. How large would the salvage value have to be to result in a positive net present value?
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