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Chapter 13: Applying Excel                                                                   YOUR NAME HERE
                                                                                             can work either of the 2
Data                                                                                         solutions listed below.
Example C
Cost of equipment needed                                                           $60,000
Working capital needed                                                            $100,000
Overhaul of equipment in                                              4 years       $5,000
Salvage value of the equipment in                                     5 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 13-4

Sales revenues                                                                          ?
Less cost of goods sold                                                                 ?
Less out-of-pocket costs                                                                ?
Annual net cash inflows                                                                 ?

                                                                                Amount of        ?      Present Value
                                                                  Year(s)       Cash Flow     Factor*   of Cash Flows
Purchase of equipment                                                 Now                ?     1.000                ?
Working capital needed                                                Now                ?     1.000                ?
Overhaul of equipment                                                 ?                  ?       ?                  ?
Annual net cash inflows from sales of the product line             1- ?                  ?       ?                  ?
Salvage value of equipment                                            ?                  ?       ?                  ?
Working capital released                                              ?                  ?       ?                  ?
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


Alternate solution, using Excel =NPV, =IRR functions:                           Amount of
                                                                  Year(s)       Cash Flow
                                                                        0                ?
                                                                        1                ?
                                                                        2                ?
                                                                        3                ?
                                                                        4                ?
                                                                        5                ?
                                                                        6                ?
                                                                        7                ?
                                                                        8                ?
                                                                        9                ?
                                                                       10                ?
                                                                PV of FCF                ?
                                                                Investment               ?
                                                                Net PV                   ?

                                                                IRR                      ?
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