The Excel worksheet form that appears below is to be used to recreate Example E and Exhibit 13–8. Download the workbook containing this form from Connect, where you will also receive instructions about how to use this worksheet form.
Exhibit 13 – 8: The Net Present Value Method—An Extended Example
You should proceed to the requirements below only after completing your worksheet. Note that you may get a slightly different net present value from that shown in the text due to the precision of the calculations.
Required:
1. Check your worksheet by changing the discount rate to 10%. The net present value should now be between $56,495 and $56,518—depending on the precision of the calculations. If you do not get an answer in this range, find the errors in your worksheet and correct them. Explain why the net present value has increased as a result of reducing the discount rate from 14% to 10%.
2. The company is considering another project involving the purchase of new equipment. Change the data area of your worksheet to match the following:
Data
Example E
Cost of equipment needed . . . . . . . . . . . . . . . $120,000
Working capital needed . . . . . . . . . . . . . . . . . . $80,000