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 7B-1 and Exhibit 7B-2. (Use appropriate factor(s) from the tables provided.)

1

2

3

4

5

6

7

8

9

10

11

12

13

Chapter 7: Applying Excel
Data
Example E
Cost of equipment needed	$320,000
Working capital needed	$35,000
Overhaul of equipment in four years	$30,000
Salvage value of the equipment in five years	$25,000
Annual revenues and costs:
Sales revenues	$360,000
Cost of goods sold	$210,000
Out-of-pocket operating costs	$55,000
Discount rate	15	%

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.)?

d. Reset the discount rate to 15%. Suppose the salvage value is uncertain. How large would the salvage value have to be to result in a positive net present value?