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Required information Excel Analytics 14-1 (Static) Internal Rate of Return [LO14-2, LO14-3] Stauffer Company has an opportunity to manufacture and sell a new product
Required information Excel Analytics 14-1 (Static) Internal Rate of Return [LO14-2, LO14-3] Stauffer Company has an opportunity to manufacture and sell a new product for a five-year period. The company estimated the following costs and revenues for the new product: $420,000 Cost of new equipment Initial working capital required Overhaul of the equipment after three years Salvage value of the equipment after five years Annual revenues and costs: Sales Variable expenses Fixed out-of-pocket operating costs $850,000 $500,000 $200,000 $ 80,000 $ 50,000 $ 30,000 When the project concludes in five years the working capital will be released for Investment elsewhere in the company. Click here to download the Excel template, which you will use to answer the questions that follow. Click here for a brief tutorial on Goal Seek in Excel. Excel Analytics 14-1 (Static) Part 2 2. Refer to the Excel template. a. Why does cell B7 have an $80,000 cash outflow, whereas cell G10 shows the same $80,000 as a cash inflow? b. Will the value of 1.000 that is shown in cell B15 stay constant or change as the Excel template is used to calculate the Internal rate of return? Why? c. Will the values of 1.000 that are shown in cells C15 through G15 stay constant or change as the Excel template is used to calculate the Internal rate of return? Why? d. Will the discount factors in cells C15 through G15 Increase or decrease as the discount rate in cell B3 Increases? Why? e. Once the discount rate in cell B3 is changed to some percentage greater than zero, will the amount shown in cell C16 always be greater than or less than the amount shown In cell F16? Why? f. Would it be correct to conclude that this project has a net present value of $310,000 given that this is the amount currently shown In cell B17? Why? g. Once this template has been used to calculate the Internal rate of return, what dollar amount will appear in cell B17? Complete this question by entering your answers in the tabs below. Req 2A Req 2B Req 2C Req 2D Req 2E Req 2F Req 2G 2g. Once this template has been used to calculate the internal rate of return, what dollar amount will appear in cell B17? Dollar amount $ 345,000 < Req 2F Req 2G >
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