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The following data are accumulated by Geddes Company in evaluating the purchase of $120,000 of equipment, having a four-year useful life: Net Income Net Cash
The following data are accumulated by Geddes Company in evaluating the purchase of $120,000 of equipment, having a four-year useful life:
Net Income | Net Cash Flow | |||
Year 1 | $43,000 | $73,000 | ||
Year 2 | 22,500 | 52,500 | ||
Year 3 | 15,500 | 45,500 | ||
Year 4 | 4,500 | 34,500 |
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?
YesNoYes
, the net present value indicates that the return on the proposal isgreaterlessgreater
than the minimum desired rate of return of 12%.
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