EXHIBIT 14-8 The Net Present Value Method-An Extended Example C D E F G Year 2 3 5 2 3 Purchase of equipment 4 Investment in working capital 5 Sales 6 Cost of goods sold 7 Out-of-pocket costs for salaries, advertising, etc. 8 Overhaul of equipment 9 Salvage value of the equipment Now $ (60,000) $ (100,000) $200,000 $200,000 $200,000 $200,000 $200,000 $ (125,000) $ (125,000) $ (125,000) $ (125,000) 5 (125,000) $ (35,000) $ (35,000) $ (35,000) $ (35,000) $ (35,000) $ (5,000) $ 10,000 $ 100,000 10 Working capital released 11 Total cash flows (a) 12 Discount factor (14%) (b) 13 Present value of cash flows (a) x (b) 14 Net present value (SUM 813:G13) 15 $ (160,000) $ 40,000 $ 40,000 $ 40,000 $ 35,000 $150,000 0.877 0.769 0.675 1.000 0.592 $ 0.519 $ (160,000) $ 35,080 $ 30,760 $ 27,000 $20,720 $ 77,850 $ 31,410 16 Note: The discount factors come from Exhibit 148-1 in Appendix 148. 17 OR Exhibit 14-8 Exhbt 14-9 Exhibt 14-10 Exhbt 14-11 Source: Microsoft Excel Exhbe