Download the Applying Excel form and enter formulas in all cells that contain question marks. For example, in cell C22 enter the formula '= B10" Note: The present value factors could be computed using the built-in Excel function PV, but we recommend using the formulas in Appendix 13B. Verify that your worksheet matches the example in the text. Check your worksheet by changing the discount rate to 10%. The net present value should now be between $56,518 and $56,535-depending on the precision of the calculations. If you do not get an answer in this range, find the errors in your worksheet and correct them. Click here to view Exhibit 13B-1 and Exhibit 13B-2. to determine the appropriate discount factor(s) using tables. Save your completed Applying Excel form to your computer and then upload it here by clicking "Browse." Next, click "Save." You will use this worksheet to answer the questions in Part 2 1 Chapter 13: Applying Excel Years 3 Data 4 Example E 5 Cost of equipment needed $60,000 6 Working capital needed $100,000 7 Overhaul of equipment in four years $5,000 8 Salvage value of the equipment in five years $10,000 9 Annual revenues and costs: 10 Sales revenues $200,000 11 Cost of goods sold $125,000 12 Out-of-pocket operating costs $35,000 13 Discount rate 14% 14 15 Enter a formula into each of the cells marked with a ? below 16 Exhibit 13-8 17 18 Now 19 Purchase of equipment 20 Investment in working capital 21 Sales 22 Cost of goods sold 23 Out-of-pocket operating costs 24 Overhaul of equipment 25 Salvage value of the equipment 26 Working capital released 27 Total cash flows (a) 28 Discount factor (14%) (b) 29 Present value of cash flows (a) (b) 30 Net present value 31 32 *Use the formulas from Appendix 13B: 33 Present value of $1 = 1/(1+r)^n 34 Present value of an annuity of $1 = (1/r)*(1-(1/(1+r)^n)) 35 where n is the number of years and r is the discount rate 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.) B C 1 Chapter 13: Applying Excel 3 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: 10 Sales revenues |11| Cost of goods sold 12 Out-of-pocket operating costs 13 Discount rate $360,000 $ 20,000 $ 40,000 $ 35.000 9 $ 405,000 $ 240,000 $ 70,000 10% 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 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 10%. 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
