Net Present Value

Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase of $129,200 of 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 696 1096 1296 1596 2096 1 0.943 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 0.564 0.507 0.432 0335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.3270.233 0.5920.4240.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Assumingthat the desired rate of return is 20%, 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. If required, use the minus sign to indicate a negative net present value