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The Chapter 14 Form worksheet is to be used to create your own worksheet version of Example E and Exhibit 14-8 in the text.

Download the Applying Excel form and enter formulas in all cells that contain question marks.

For example, in cell C21 enter the formula "= B10".

Note: The present value factors could be computed using the built-in Excel function PV, but we recommend using the formulas in Appendix 14B.

Verify that your worksheet matches the example in the text.

Check your worksheet by changing the discount rate to 10%. The net present value should now be between $56,400 and $56,535depending on the precision of the calculations. If you do not get an answer in this range, find the errors in your worksheet and correct them. If you did not use formulas to calculate the Discount Factors, be sure that those values are updated appropriately using the Appendix 14B formulas that are also noted at the bottom of the spreadsheet instead of using the Discount Factor tables.

Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.

Save your completed Applying Excel form to your computer and then upload it here by clicking Browse. Next, click Save. You will use this worksheet to answer the questions in Part 2.

Chapter 14: Applying Excel Data Example E Cost of equipment needed $60,000 Working capital needed $100,000 Overhaul of equipment in four years $5,000 Salvage value of the equipment in five years $10,000 Annual revenues and costs: Sales revenues $200,000 Cost of goods sold $125,000 Out-of-pocket operating costs $35,000 Discount rate 14% Enter a formula into each of the cells marked with a ? below Exhibit 14-8 Years Now 1 2 3 4 5 Purchase of equipment ? Investment in working capital ? Sales ? ? ? ? ? Cost of goods sold ? ? ? ? ? Out-of-pocket operating costs ? ? ? ? ? Overhaul of equipment ? Salvage value of the equipment ? Working capital released ? Total cash flows (a) ? ? ? ? ? ? Discount factor (14%) (b) ? ? ? ? ? ? Present value of cash flows (a) x (b) ? ? ? ? ? ? Net present value ? *Use the formulas from Appendix 13B: Present value of $1 = 1/(1+r)^n Present value of an annuity of $1 = (1/r)*(1-(1/(1+r)^n)) where n is the number of years and r is the discount rate

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The Chapter 14 Form worksheet is to be used to create your own worksheet version of Example E and Exhibit 14-8 in the text.

2. The company is considering a project involving the purchase of new equipment. Change the data area of your worksheet to match the following: Use Exhibit 14B-1 and Exhibit 14B-2. (Use appropriate factor(s) from the tables provided.)

a. What is the net present value of the project? (Negative amount should be indicated by a minus sign. Round your present value factor to 3 decimals and round all other intermediate calculations to nearest whole dollar.)

c. The internal rate of return is between what two whole discount rates (e.g., between 10% and 11%, between 11% and 12%, between 12% and 13%, between 13% and 14%, etc.)?

d. Reset the discount rate to 11%. Suppose the salvage value is uncertain. How large would the salvage value have to be to result in a positive net present value?