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Net Present Value Method The following data are accumulated by Wocester Hat Company in evaluating the purchase of $86,100 of equipment, having a four-year useful
Net Present Value Method
The following data are accumulated by Wocester Hat Company in evaluating the purchase of $86,100 of equipment, having a four-year useful life:
Net Income (Loss) | Net Cash Flows | |||
Year 1 | $30,000 | $51,000 | ||
Year 2 | 18,000 | 39,000 | ||
Year 3 | 9,000 | 30,000 | ||
Year 4 | (1,000) | 20,000 |
Assuming that the desired rate of return is 15%, determine the net present value for the proposal. Use the table of the present value of $1 presented above. If required, use the minus sign to indicate a negative net present value.
Present value of net cash flow | $ |
Amount to be invested | |
Net present value | $ |
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