Textbook: Fundamentals of Corporate Finance, 5th Edition

Authors: Robert Parrino, Thomas Bates, Stuart Gillan, David Kidwell

Publisher: Wiley

Chapter 5: The Time Value of Money

Excel templates for selected problems at end of Chapter 5

Problem Problem Worksheet

number Description tab name
36 NPER function/formula 36_NPER_function
36 Alternative, using schedule 36_Alternative_Schedule

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Chapter 5, Problem 36 Student's Name:
Solution method uses NPER function/formulas.

Guidelines: <-- To view guidelines, move mouse pointer over cell with red triangle. Red triangle identifies a c

Problem:
Surmec, Inc., reported sales of $2.1 million last year. The company’s primary business is the manufacture of nuts and bo
Since this is a mature industry, analysts are confident that sales will grow at a steady rate of 7 percent per year. The
company’s net income equals 23 percent of sales. Management would like to buy a new fleet of trucks but can only do s
once the net income reaches $620,000 a year. At the end of what year will Surmec be able to buy the trucks? What will
sales and net income be in that year?

Unknown:
Number of years before Surmec can buy the trucks, net income reaches $620,000.

Assumption(s):
Annual sales growth rate is annual rate with annual compounding.
Sales occur at the end of the year.

Given information/inputs/arguments: Values Comments

Annual sales growth 7.00% Enter percentage as percent X.XX%, or decimal. .
Compounding frequency 1.00 Enter compounding frequency for annual growth
Annuity payment, pmt 0.00 Enter 0, not an annuity problem
Current sales, present value 2,100,000.00 Enter current sales as positive value
Net income as percent of sales 23.00% Enter percentage as percent X.XX%, or decimal. .
Net income, fv 620,000.00 Enter desired amount of net income
Type of annuity 0.00 Ener 0, not an annuity problem

Excel solution method using NPER function/formula:

Excel NPER function = #NAME? years
Excel NPER function = sales
Excel function = net income
 Date:

th red triangle. Red triangle identifies a cell comment.

business is the manufacture of nuts and bolts.

steady rate of 7 percent per year. The
buy a new fleet of trucks but can only do so
rmec be able to buy the trucks? What will

percentage as percent X.XX%, or decimal. .XXX

compounding frequency for annual growth rate
0, not an annuity problem
current sales as positive value
percentage as percent X.XX%, or decimal. .XXX
desired amount of net income
0, not an annuity problem
Chapter 5, Problem 36 Student's Name:
Solution method is a schedule which only approximates the number of years.

Guidelines: <-- To view guidelines, move mouse pointer over cell with red triangle. Red triangle identifies a c

Problem:
Surmec, Inc., reported sales of $2.1 million last year. The company’s primary business is the manufacture of nuts and bo
Since this is a mature industry, analysts are confident that sales will grow at a steady rate of 7 percent per year. The
company’s net income equals 23 percent of sales. Management would like to buy a new fleet of trucks but can only do s
once the net income reaches $620,000 a year. At the end of what year will Surmec be able to buy the trucks? What will
sales and net income be in that year?

Unknown:
Number of years before Surmec can buy the trucks, net income reaches $620,000.

Assumption(s):
Annual sales growth rate is annual rate with annual compounding.
Sales occur at the end of the year.

Given information/inputs/arguments: Values Comments

Annual sales growth Enter percentage as percent X.XX%, or decimal. .
Compounding frequency Enter compounding frequency for annual growth
Annuity payment, pmt Enter 0, not an annuity problem
Current sales, present value Enter current sales as positive value
Net income as percent of sales Enter percentage as percent X.XX%, or decimal. .
Net income, fv Enter desired amount of net income
Type of annuity Ener 0, not an annuity problem

Schedule solution (approximation):

Net income Change in Net income
Year previous year Net income end of year

Desired Net Income Achieved

Related Sales for Desired Net Income
 Date:

th red triangle. Red triangle identifies a cell comment.

business is the manufacture of nuts and bolts.

steady rate of 7 percent per year. The
buy a new fleet of trucks but can only do so
rmec be able to buy the trucks? What will

percentage as percent X.XX%, or decimal. .XXX

compounding frequency for annual growth rate
0, not an annuity problem
current sales as positive value
percentage as percent X.XX%, or decimal. .XXX
desired amount of net income
0, not an annuity problem

Net Income Achieved

Sales for Desired Net Income