Planning for Capital Investments - Excel ? - x FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Sign In Calibri - 11 I Paste BIU- A- % Alignment Number Conditional Format as Cell Formatting Table Styles Styles Cells Editing Clipboard Font A1 fix Laurman, Inc. is considering the following project: . D E $ 2,205,000 7 225,000 B 1 Laurman, Inc. is considering the following project: 2 Required investment in equipment 3 Project life 4 Salvage value 5 6 The project would provide net operating income each year as follows: 7 Sales Variable expenses Contribution margin Fixed expenses: Salaries, rent and other fixed out-of pocket costs $ Depreciation 13 Total fixed expenses Net operating income 8 2,750,000 1,600,000 1,150,000 9 $ 10 11 520,000 350,000 12 870,000 280.000 14 $ 15 16 Company discount rate 18% 17 18 1. Compute the annual net cash inflow from the project. 19 (Note: depreciation is the only noncash expense on the income statement) 20 2. Complete the table to compute the net present value of the investment. 21 21 22 7 Year(s) 23 Now 1-7 24 Initial investment 25 Annual cost savings 26 Salvage value of the new machine 27 Total cash flows 28 Discount factor 1.000 29 Present value of the cash flows 30 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. 39 40 5. Compute the project's unadjusted rate of return. 41 years 42 43 Sheet1 II. + READY T + 100%