3 Part 3 of 3 Required information Elsner Company has an opportunity to manufacture and sell a new product for a five-ye

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3 Part 3 of 3 Required information Elsner Company has an opportunity to manufacture and sell a new product for a five-year period. The company estimated the following costs and revenues for the new product 2 points Cost of new equipment Initial working capital required Overhaul of the equipment after three years Salvage value of the equipment after five years Annual revenues and costs $420,000 $110.000 $ 50,000 $ 30,000 Herences Sales Variable expenses Fixed out-of-pocket operating conta 5850,000 $500,000 $196,000 When the project concludes in five years the working capital will be released for investment elsewhere in the company Click here to download the Excel template which you willst to answer the questions that follow. Click here for a bele tutorial on Goal Seek in Excel
Part 3 of 3 2 points 3. In the Excel template, using Goal Seek, calculate this investment's internal rate of return. If the company's hurdle rate is 18% would it be likely to accept or reject the investment? Why? 4. What is the project's net present value when using a discount rate of 18%? 5. If the company wants to achieve an 18% return on this investment, what is the maximum amount that it can spend each year on fixed out-of-pocket operating costs? Use Goal Seek to compute your answer. Note: The fixed out of pocket operating costs remain constant for all five years, therefore modifying cell C13 automatically updates cells D13 through G13. 6. If the investment in working capital increased from $110,000 to $130,000 would you expect the internal rate of return to increase. decrease, or stay the same? No computations are necessary to answer this question, 7. Refer to the original data. Using Gool Seek, calculate the internal rate of return the investment in working capital increases from $110,000 to $130.000. Note: Be sure to return the fixed out of pocket operating costs to the original value of $196,000) Reference Complete this question by entering your answers in the tabs below. Reg Reg 38 Reg 4 Regs Reg 6 Reg 7 Using Microsoft Excel Goal Seek, calculate the investment's Internal rate of return Internal mute of return Req30 >
Complete this question by entering your answers in the tabs below. Reg 3A Reg 38 Reg 4 Reg 5 Reg 6 Req7 4. What is the project's net present value when using a discount rate of 18%? Net present value < Req 38 Reg 5 >
Complete this question by entering your answers in the tabs below. Reg 3A Reg 38 Reg 4 Reg 5 Reg 7 5. If the company wants to achieve an 18% return on this investment, what is the maximum amount that it can spend each year on fixed out-of-pocket operating costs? Use Goal Seek to compute your answer. Note: The fixed out-of-pocket operating costs remain constant for all five years, therefore modifying cell C13 automatically updates cells D13 through G13. Operating costs < Req Req6 >
Complete this question by entering your answers in the tabs below. Rea ЗА Reg 38 Red 4 Reg 5 Reg 6 Req 7 7. Refer to the original data. Using Goal Seek, calculate the internal rate of retum if the investment in working capital increases from $110,000 to $130,000. Note: Be sure to return the fixed out-of-pocket operating costs to the original value or (5196,000). Internal rate of return ( Reg
Blue cells can be modified 1 2 0.0% 5 4 1 2 3 $ $ Now (420,000) (80,000) 3 Discount rate 4 5 6 Purchase of equipment 7 Investment in working capital 8 Overhaul of equipment 9 Salvage value of the equipment 10 Working capital released 11 Sales 12 Variable expenses 13 Fixed out of pocket operating costs 14 Total cash flows (a) 15 Discount factor (b) 16 Present value of cash flows (a) (b) 17 Net present value (SUM 316:616) 18 19 20 $ (50,000) $ 30,000 $ 80,000 850,000 $ 850,000 $ 850,000 $ 850,000S 850,000 (500,000) $ (500,000) S (500,000) (500,000) S (500,000) (200,000) S (200,000) $ (200,000) S (200,000) $ (200,000) 150,000 150,000 $ 100,000 $ 150,000 260,000 1.000 1.000 1.000 1.000 1.000 150,000 $ 150,000 100,000 $ 150,000 $ 260,000 $ $ S (500,000) $ 1.000 (500,000) $ 310,000 $ $ $ 22 23