Required information

The Chapter 13 Form worksheet is to be used to create your own worksheet version of Example E and Exhibit 13-8 in the text.

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

For example, in cell C22 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 13B.

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 $56,518 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.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

Chapter 13: 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 13-8
		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

EXHIBIT 13-8 The Net Present Value Method-An Extended Example Year Now $ (60,000) (100,000) 4 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 $ 200,000$ 200,000 $ 200,000 200,000 200,000 $ (125,000) (125,000) $(125,000) (125,000) (125,000) S (35,000) S (35,000) S (35,000) S (35,000) S(35,000) S(5,000) $ 10,000 100,000 S (160,000) 40,000 $ 40,000 40,000 35,000 S 150,000 0.592 S 0.519 (160,000)35,080 $ 30,760 27,000 20,720$ 77,850 10 Working capital released 11 Total cash flows (a) 12 Discount factor (14%) (b) 13 Present value of cash flows (a) x (b) 14 Net present value (SUM B13:G13) 1.000 0.877 0.769 0.675 $ 31,410 15 16 Note: The discount factors come from Exhibit 13B-1 n Appendix 13B 34 , . Exhbit 13-3 i Exhibit 13-4 Exhibit 13-5 Exhbit 13-6- Exhibit 13-7 Exhibit 13-8, Exhibit