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Net present value method The following data are accumulated by Geddes Company in evaluating the purchase of $140,000 of equipment, having a four-year useful life:
Net present value method
The following data are accumulated by Geddes Company in evaluating the purchase of $140,000 of equipment, having a four-year useful life:
Net Income | Net Cash Flow | |||
Year 1 | $42,000 | $77,000 | ||
Year 2 | 23,000 | 58,000 | ||
Year 3 | 15,000 | 50,000 | ||
Year 4 | 5,000 | 40,000 |
This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.
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- Assuming that the desired rate of return is 12%, determine the net present value for the proposal. If required, round to the nearest dollar.
Net present value $fill in the blank 2 - Would management be likely to look with favor on the proposal?
, the net present value indicates that the return on the proposal is than the minimum desired rate of return of 12%.
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