Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $116,900 of equipment, having a four-year useful life: Net Cash Flow Net Income Year 1 Year 2 Year 3 Year 4 Year 1 2 $37,000 $63,000 23,000 49,000 11,000 37,000 (1,000) 25,000 Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.370 0.833 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.482 0.742 0.621 0.567 0.497 0.402 0.705 0.564 0,507 0.432 0.335 0.665 0.513 0.452 0.376 0.229 0.627 0.467 0.404 0.327 0.233 0.592 0.424 0.361 0.284 0.194 0.558 0.386 0.322 0.247 0.162 3 5 6 7 8 9 10 Ce My Work 0.70 7 0.665 0.513 0,452 0.376 0.279 8 0.467 0.404 0.327 0.233 0.627 0.592 0 0.424 0.361 0.24 0.194 10 0.558 0.356 0.322 0.247 0.162 a. Assuming that the desired rate of return is 10%, determine the net present value for the proposal. Use the table of the present value of si presented above. If required, round to the nearest dollar. It 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 1. Would management be likely to look with favor on the proposal? Yes because the net present value indicates that the return on the proposal is rater than the minimum desired rate of return of 10% a. Multiply the present we of 51 factor for each year (fer Exhibit 2 in the text) by that year's net cash now. Subtract the amount to be invested from the total present value of the nutch flow. Will management be more favorable to a positive net presentar or a negative net presentate? 1. Consider the time value of money Check My Work Dr