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.)

Chapter 13: Applying Excel

Data

Example E

Cost of equipment needed $

310,000

Working capital needed $

30,000

Overhaul of equipment in four years $

25,000

Salvage value of the equipment in five years $

35,000

Annual revenues and costs:

Sales revenues $

385,000

Cost of goods sold $

230,000

Out-of-pocket operating costs $

60,000

Discount rate 17 %

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.)

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 % and %

d. Reset the discount rate to 17%. 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