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Data Example E Cost of equipment needed $60,000 Working capital needed $100,000 Overhaul of equipment in four years $5,000 Salvage value of the equipment in
Data | |
Example E | |
Cost of equipment needed | $60,000 |
Working capital needed | $100,000 |
Overhaul of equipment in four years | $5,000 |
Salvage value of the equipment in five years | $10,000 |
Annual revenues and costs: | |
Sales revenues | $200,000 |
Cost of goods sold | $125,000 |
Out-of-pocket operating costs | $35,000 |
Discount rate | 14% |
Enter a formula into each of the cells marked with a ? below | ||||||
Exhibit 7-8 | ||||||
Years | ||||||
Now | 1 | 2 | 3 | 4 | 5 | |
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 | ? |
*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 |
Fill in the cells with question marks using formulas that refer back to the given data.
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