question archive Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $133,500 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 Year 2 Year 3 Year 4 $40,000 $67,000 24,000 52,000 12,000 39,000 (1,000) 26,000 Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% 0
Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $133,500 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 Year 2 Year 3 Year 4 $40,000 $67,000 24,000 52,000 12,000 39,000 (1,000) 26,000 Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% 0
Subject:AccountingPrice: Bought3
Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $133,500 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 Year 2 Year 3 Year 4 $40,000 $67,000 24,000 52,000 12,000 39,000 (1,000) 26,000 Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 Year 1 2. 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 1.452 0.376 0.279 8 CO 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Assuming that the desired rate of return is 6%, determine the net present value for the proposal. Use the table of the present value of $1 presented above. If required, round to the nearest dollar. Present value of net cash flow Amount to be invested Net present value b. Would management be likely to look with favor on the proposal? because the net present value indicates that the return on the proposal is than the minimum desired rate of return of 6%.
