For example, in cell 22 enter the formula-10 Note: The present value factors could be computed using the built in Excel function PV but we recommend using the formulas in Appender 38 Verify that your worksheet matches the example in the text The net presentou should now be between $50.5 and 565 depending on the precision of the calculations you do not get an answer in this Check your worksheet by changing the discount to 10 ange, find the error in your worksheet and correct them EXHIBIT 13-8 The Net Present Value Method-An Extended Example 160,000) (100,000) 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 10 Working Capital released 11 Total cash flows() 12 Discount factor (14%) (b) 13 Prosent value of cash flows (a) (b) 14 Net present value (SUM 113:613) $ 200,000 $ 200,000 $ 200,000 $ 200,000 $ 200,000 S(125,000) S (125,000) S(125,000) S (125,000) S(125,000) S (35,000) S (35,000) S (35.000) S (35,000) S (35,000) S (5,000) S 10,000 $ 100,000 $ 10,000 35,000 150,000 0.592 S 0.519 20.220 22,850 (160,000) $ (160,000) 16 Noter The discount factors come from Exhibit 138-14 3 Data 4 Example E 5 Cost of equipment needed 6 Working capital needed 7 Overhaul of equipment in four years 8 Salvage value of the equipment in five years 9 Annual revenues and costs: 10 Sales revenues 11 Cost of goods sold 12 Out-of-pocket operating costs 13 Discount rate $60,000 $100,000 $5,000 $10,000 $200,000 $125,000 $35,000 14% 15 Enter a formula into each of the cells marked with a ? below 16 Exhibit 138 18 Now Years 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) x (b) 30 Net present value 31 32 "Use the formulas from Appendix 13B 33 Present value of $1 = 1/(1+ry'n 34 Present value of an annuity of $1 = (1/1)(1-1/(1+ry'n)) 35 where n is the number of years and r is the discount rate