Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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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.)
A
1 Chapter 14: Applying Excel
2
3
Data
4 Example E
5
6 Working capital needed
7 Overhaul of equipment in four years
8
009
10
11
12
13
Cost of equipment needed
Salvage value of the equipment in five years
Annual revenues and costs:
Sales revenues
Cost of goods sold
Out-of-pocket operating costs
Discount rate
Net present value
S
The internal rate of ratum is between
$
$
and
$
$
$
$
$
B
310,000
50,000
25,000
30,000
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.)
(1.734)
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.)?
435,000
265,000
с
70,000
18 %
d. Reset the discount rate to 18 % . Suppose the salvage value is uncertain. How large would the salvage value have to be to result in a
positive net present value?
Minimum salvage value required to generate a positive present value
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Transcribed Image 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.) A 1 Chapter 14: Applying Excel 2 3 Data 4 Example E 5 6 Working capital needed 7 Overhaul of equipment in four years 8 009 10 11 12 13 Cost of equipment needed Salvage value of the equipment in five years Annual revenues and costs: Sales revenues Cost of goods sold Out-of-pocket operating costs Discount rate Net present value S The internal rate of ratum is between $ $ and $ $ $ $ $ B 310,000 50,000 25,000 30,000 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.) (1.734) 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.)? 435,000 265,000 с 70,000 18 % d. Reset the discount rate to 18 % . Suppose the salvage value is uncertain. How large would the salvage value have to be to result in a positive net present value? Minimum salvage value required to generate a positive present value
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