Net Present Value Method

Net Present Value Method The following data are accumulated by Paxton Company in evahuating the purchase of $129,200 f equipment, having a four-year useful life: Net Cash Flow $73,000 56,000 42,000 28,000 Net Income $43,000 26,000 13,000 (1,000) Year 1 Year 2 Year 3 Year 4 Present Value of $1 at Compound Interest Year 6% 10% 126 15% 206 10.943 0.909 0.893 0.870 0.833 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 0564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 S0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.2840.194 10 0.558 0.386 0.322 0.247 0.162 a. Awwungtat the desired rate of return is 20%, determine the net present value for the proposal. Use the table of the present value of S1 presented above. If required, round to the nearest dollar. If required, use the minus sign to indicate a negative net present value b. Would management be likely to look with favor on the proposal