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

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Accounting

2. The company is considering a project involving the purchaseof new equipment. Change the data area of your worksheet to matchthe following: Use Exhibit 12B-1 and Exhibit 12B-2. (Useappropriate factor(s) from the tables provided.)
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Chapter 12: Applying Excel
Data
Example E
Cost of equipment needed $260,000
Working capital needed $60,000
Overhaul of equipment in fouryears $20,000
Salvage value of the equipment in fiveyears $25,000
Annual revenues and costs:
Sales revenues $420,000
Cost of goods sold $265,000
Out-of-pocket operating costs $65,000
Discount rate 18 %
a. What is the net present value of the project?(Negative amount should be indicated by a minus sign. Roundyour present value factor to 3 decimals and round all otherintermediate calculations to nearest whole dollar.)

c. The internal rate of return is between what two wholediscount 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 18%. Suppose the salvage value isuncertain. How large would the salvage value have to be to resultin a positive net present value?

Answer & Explanation Solved by verified expert

3.8 Ratings (493 Votes)

Solution aComputation of NPVParticularsAmountPeriodPV FactorPresent ValueCash OutflowsCost of equipment2600000126000000Working See Answer

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2. The company is considering a project involving the purchaseof new equipment. Change the data area of your worksheet to matchthe following: Use Exhibit 12B-1 and Exhibit 12B-2. (Useappropriate factor(s) from the tables provided.)12345678910111213Chapter 12: Applying ExcelDataExample ECost of equipment needed$260,000Working capital needed$60,000Overhaul of equipment in fouryears$20,000Salvage value of the equipment in fiveyears$25,000Annual revenues and costs:Sales revenues$420,000Cost of goods sold$265,000Out-of-pocket operating costs$65,000Discount rate18%a. What is the net present value of the project?(Negative amount should be indicated by a minus sign. Roundyour present value factor to 3 decimals and round all otherintermediate calculations to nearest whole dollar.)c. The internal rate of return is between what two wholediscount 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 18%. Suppose the salvage value isuncertain. How large would the salvage value have to be to resultin a positive net present value?