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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.)

Chapter 14:

Applying Excel Data

Example E Cost of equipment needed 290,000 Working capital needed 20,000 Overhaul of equipment in four years 35,000 Salvage value of the equipment in five years 20,000 Annual revenues and costs: Sales revenues 405,000 Cost of goods sold 270,000 Out-of-pocket operating costs 55,000 Discount rate 12 %

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 12%. Suppose the salvage value is uncertain. How large would the salvage value have to be to result in a positive net present value?