Homework Answers
1.
| INCOME STATEMENT | ||||||
| PATICULARS | YEARS | |||||
| 0 | 1 | 2 | 3 | 4 | 5 | |
| 1. SALES | $ 390,000.00 | $ 390,000.00 | $ 390,000.00 | $ 390,000.00 | $ 390,000.00 | |
| 2. VARIABLE COST | $ 270,000.00 | $ 270,000.00 | $ 270,000.00 | $ 270,000.00 | $ 270,000.00 | |
| 3. OUT OF POCKET EXPENSES | $ 50,000.00 | $ 50,000.00 | $ 50,000.00 | $ 50,000.00 | $ 50,000.00 | |
| 4. DEPRICIATION | $ 46,000.00 | $ 46,000.00 | $ 46,000.00 | $ 46,000.00 | $ 46,000.00 | |
| (250000-20000)/5 | ||||||
| 5. NET PROFIT | $ 24,000.00 | $ 24,000.00 | $ 24,000.00 | $ 24,000.00 | $ 24,000.00 | |
| (1-2-3-4) | ||||||
| 6. AFTER TAX CASH FLOWS | $ 70,000.00 | $ 70,000.00 | $ 70,000.00 | $ 70,000.00 | $ 70,000.00 | |
| (5. + 4. ) | ||||||
| CASH FLOWS CALCULATIONS | |||||||
| PARTICULARS | YEARS | ||||||
| 0 | 1 | 2 | 3 | 4 | 5 | ||
| 1. INITIAL INVESTMENTS | |||||||
| COST OF EQUIPMENT | $ 250,000.00 | ||||||
| WORKING CAPITAL | $ 55,000.00 | ||||||
| $ 305,000.00 | |||||||
| 2. CASH FLOWS | |||||||
| CASH FLOWS FROM PROJECT | $ 70,000.00 | $ 70,000.00 | $ 70,000.00 | $ 70,000.00 | $ 70,000.00 | ||
| WORKING CAPITAL | $ 55,000.00 | ||||||
| OVERHAUL OF MACHINE IN 4 YEARS | $ (30,000.00) | ||||||
| SALVAGE VALLUE OF EQUIPMENT | $ 20,000.00 | ||||||
| TOTAL CASH FLOWS | $ 70,000.00 | $ 70,000.00 | $ 70,000.00 | $ 40,000.00 | $ 145,000.00 | ||
| 3. DISCOUNTING FACTOR | 0.89286 | 0.7972 | 0.7118 | 0.6355 | 0.5674 | ||
| 12.00% | |||||||
| 4. DISCOUNTED CASH FLOWS | $ 62,500 | $ 55,804 | $ 49,825 | $ 25,421 | $ 82,277 | ||
| (3.*2.) | |||||||
| 5. NET PRESENT VALUE | $ (305,000.00) | $ 62,500.00 | $ 55,803.57 | $ 49,824.62 | $ 25,420.72 | $ 82,276.89 | $ (29,174.194) |
| (4. - 1.) | |||||||
| TOTAL NPV | $ (29,174.194) |
| NPV USING EXCEL | |
| INFLOWS | $275,825.81 |
| INITIAL OUTFLOWS | $ (305,000.00) |
| NPV | ($29,174.19) |
2.
IRR USING EXCEL
| CASH FLOWS CALCULATIONS | |||||||
| PARTICULARS | YEARS | IRR | |||||
| 0 | 1 | 2 | 3 | 4 | 5 | ||
| TOTAL CASH FLOWS | $ (305,000.00) | $ 70,000.00 | $ 70,000.00 | $ 70,000.00 | $ 40,000.00 | $ 145,000.00 | 8.39% |
SHOW FORMULA
| CASH FLOWS CALCULATIONS | |||||||
| PARTICULARS | YEARS | ||||||
| 0 | 1 | 2 | 3 | 4 | 5 | ||
| TOTAL CASH FLOWS | -305000 | 70000 | 70000 | 70000 | 40000 | 145000 | =IRR(RC[-6]:RC[-1]) |
IRR IS BETWEEN 8% AND 9%.
3. BY USING GOAL SEEK, IF SALVAGE VALUE IS $71,416.66, NPV WOULD BE POSSIBLE.
| CASH FLOWS CALCULATIONS | |||||||
| PARTICULARS | YEARS | ||||||
| 0 | 1 | 2 | 3 | 4 | 5 | ||
| 1. INITIAL INVESTMENTS | |||||||
| COST OF EQUIPMENT | $ 250,000.00 | ||||||
| WORKING CAPITAL | $ 55,000.00 | ||||||
| $ 305,000.00 | |||||||
| 2. CASH FLOWS | |||||||
| CASH FLOWS FROM PROJECT | $ 70,000.00 | $ 70,000.00 | $ 70,000.00 | $ 70,000.00 | $ 70,000.00 | ||
| WORKING CAPITAL | $ 55,000.00 | ||||||
| OVERHAUL OF MACHINE IN 4 YEARS | $ (30,000.00) | ||||||
| SALVAGE VALLUE OF EQUIPMENT | $ 71,416.66 | ||||||
| TOTAL CASH FLOWS | $ 70,000.00 | $ 70,000.00 | $ 70,000.00 | $ 40,000.00 | $ 196,416.66 | ||
| 3. DISCOUNTING FACTOR | 0.89286 | 0.7972 | 0.7118 | 0.6355 | 0.5674 | ||
| 12.00% | |||||||
| 4. DISCOUNTED CASH FLOWS | $ 62,500 | $ 55,804 | $ 49,825 | $ 25,421 | $ 111,452 | ||
| (3.*2.) | |||||||
| 5. NET PRESENT VALUE | $ (305,000.00) | $ 62,500.00 | $ 55,803.57 | $ 49,824.62 | $ 25,420.72 | $ 111,452.09 | $ 1.000 |
| (4. - 1.) | |||||||
Add Answer to:
The company is considering a project involving the purchase of new equipment Change the data area...
2. The company is considering a project involving the purchase of new equipment. Change the data...
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 13B-1 and Exhibit 13B-2. (Use appropriate factor(s) from the tables provided.) 1 Chapter 13: Applying Excel Data 4 $ 5 6 7 $ 340,000 20,000 40,000 25,000 $ $ Example E Cost of equipment needed Working capital needed Overhaul of equipment in four years Salvage value of the equipment in five years Annual revenues...
2. The company is considering a project involving the purchase of new equipment. Change the data...
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 13B-1 and Exhibit 13B-2. (Use appropriate factor(s) from the tables provided.) We were unable to transcribe this imagea. 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.)...
The company is considering a project involving a purchase of new equipment. Change the data area...
The company is considering a project involving a purchase of new equipment. Change the data area of your worksheet to match the following: Cost of new equipment needed: $370,000 Working capital needed: $45,000 Overhaul of equipment in four years: $30,000 Salvage value of equipment in five years: $25,000 Annual revenues and costs: Sales revenues: $430,000 Cost of goods sold: $250,000 Out-of-pocket operating costs: $70,000 Discount rate: 15% 1. What is the net present value of the project? 2. The internal...
a. What is the net present value of the project? (Negative amount should be indicated by...
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 13%. Suppose the salvage value is...
part 1 part 2 Data Example E Cost of equipment needed Working capital needed Overhaul of...
part 1
part 2
Data Example E Cost of equipment needed Working capital needed Overhaul of equipment in four years Salvage value of the equipment in five years Annual revenues and costs: Sales Cost of goods sold Out-of-pocket operating costs Discount rate $60,000 $100.000 $5,000 $10,000 $200,000 $125,000 $35,000 14% Enter a forma into each of the cells marked with a ? Below Exhibit 13-8 Years 13 14 Now (60,000) (100,000) Purchase of equipment Investment in working capital Sales Cost...
a. What is the net present value of the project? (Negative amount should be indicated by...
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...
NEED HELP! Chapter 13: Applying Excel Data Example E Cost of equipment needed $280,000 Working capital...
NEED HELP! Chapter 13: Applying Excel Data Example E Cost of equipment needed $280,000 Working capital needed $60,000 Overhaul of equipment in four years $30,000 Salvage value of the equipment in five years $25,000 Annual revenues and costs: Sales revenues $395,000 Cost of goods sold $235,000 Out-of-pocket operating costs $75,000 Discount rate 15 % 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...
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Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period....
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 15%. After careful study, Oakmont estimated the following costs and revenues for the new product: $ 145,000 63,000 9,500 13,500 Cost of equipment needed Working capital needed Overhaul of the equipment in year two Salvage value of the equipment in four years Annual revenues and costs: $ 280,000 $ 135,000 $ 73,000 Sales revenues Variable expenses Fixed out-of-pocket operating...
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 13B-1 and Exhibit 13B-2. (Use appropriate factor(s) from the tables provided.) 1 Chapter 13: Applying Excel Data 4 $ 5 6 7 $ 340,000 20,000 40,000 25,000 $ $ Example E Cost of equipment needed Working capital needed Overhaul of equipment in four years Salvage value of the equipment in five years Annual revenues...
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 13B-1 and Exhibit 13B-2. (Use appropriate factor(s) from the tables provided.) We were unable to transcribe this imagea. 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.)...
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 13%. Suppose the salvage value is...
part 1
part 2
Data Example E Cost of equipment needed Working capital needed Overhaul of equipment in four years Salvage value of the equipment in five years Annual revenues and costs: Sales Cost of goods sold Out-of-pocket operating costs Discount rate $60,000 $100.000 $5,000 $10,000 $200,000 $125,000 $35,000 14% Enter a forma into each of the cells marked with a ? Below Exhibit 13-8 Years 13 14 Now (60,000) (100,000) Purchase of equipment Investment in working capital Sales Cost...
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...
Cardinal Company is considering a five-year project that would require a $2,500,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 12%. The project would provide net operating income in each of five years as follows: $2,853,000 1,200,000 1,653,000 Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $ 790,000 500,000 1,290,000 $ 363,000 51363,000 Click here to...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 17%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed Working capital needed Overhaul of the equipment in year two Salvage value of the equipment in four years $ 275,000 $ 86,000 $ 10,000 $ 13,000 Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $ 420,000...
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