E (U ' C' ' v5 " = Comparison of Capital Budgeting MethodsExcel ? HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW i l", I t: V I t' V l" ' El Connections _; z A Y . Clear EH . n5." . 7: , . \"O , If 3 A . Z ' ' ' , . ' " Properties Reapply From From From From Other EXIstIng Refresh 31 Sort Filter Data Access Web Text Sources "' Connections All 1' Edit Links _. Y! Advanced Tools , Get External Data Connections Sort 81 Filter B30 V A B C D 1 Laurman, Inc. is considering the following project: 2 Required investment in equipment $ 2,205,000 3 Project life 7 4 Salvage value 225,000 5 6 The project would provide net operating income each year as follows: 7 Sales 35 2,750,000 3 Variable expenses 1,600,000 9 Contribution margin $ 1,150,000 10 Fixed expenses: 11 Salaries, rent and other xed out-of pocket costs $ 520,000 12 Depreciation 350 000 13 Total xed expenses 870,000 14 Net operating income i 2&4!ng 15 16 Company discount rate 18% 17 18 1. Compute the annual net cash inow from the project. 35 630,000 19 20 2. Complete the table to compute the net present value of the investment. 21 22 Year(s) 23 Now 1 5 X Sign In I213 Outline A v E A FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Sign In Connections Clear A Properties Reapply From From From From Other Existing Refresh ZJ Sort Filter Data Outline Access Web Text Sources Connections All - @ Edit Links Advanced Tools Get External Data Connections Sort & Filter B30 X V fix A B C D E 22 Year(s) 23 Now 1-7 7 24 Initial investment $ (2,205,000.00) 25 Annual cost savings $ 630,000.00 26 Salvage value of the new machine $ 225,000.00 27 Total cash flows $ (2,205,000.00) $ 630,000.00 $ 225,000.00 28 Discount factor 1.000 29 Present value of the cash flows $ (2,205,000.00) 0 Net present value 31 32 Use Excel's PV function to compute the present value of the future cash flows 33 Deduct the cost of the investment 34 Net present value 35 36 3. Use Excel's RATE function to compute the project's internal rate of return 37 38 4. Compute the project's payback period. years 39 40 5. Compute the project's simple rate of return. 41 42 43 44 ... Sheet1 ... + 1