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Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $112,800 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 $112,800 of equipment, having a four-year useful life: Net Cash Flow Net Income Year 1 $58,000 $34,000 Year 2 21,000 45,000 Year 3 10,000 34,000 (1,000) 23,000 Year 4 Present Value of $1 at Compound Interest 6% 1 096 12% 15% 20% Year 0.943 0.909 0.893 0.870 0.833 0.890 0.826 0.7970.756 0.694 658 0.579 0.840 0.751 0.712 0. 92 0.683 0.636 0.792 2 0.482 0.747 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 0.279 .404 0.327 0.233 0.6270.467 0.424 0.361o 0.592 0.194 0.284 10 0.558 0.386 0.322 0.247 0.162 a. 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, 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? than the minimum desired rate of return of 15% because the net present value indicates that the return on the proposal is
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