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  3. 2. the company is considering a project involving

2. The company is considering a project involving the purchase of new equipment. Change the...

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Accounting

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 $230,000
Working capital needed $30,000
Overhaul of equipment in four years $25,000
Salvage value of the equipment in five years $30,000
Annual revenues and costs:
Sales revenues $395,000
Cost of goods sold $260,000
Out-of-pocket operating costs $70,000
Discount rate 14 %

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 14%. Suppose the salvage value is uncertain. How large would the salvage value have to be to result in a positive net present value?

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