Question
The following data are accumulated by Lingle Company in evaluating the purchase of $97,200 of equipment, having a 4-year useful life: Net Income Net Cash
The following data are accumulated by Lingle Company in evaluating the purchase of $97,200 of equipment, having a 4-year useful life: Net Income Net Cash Flow Year 1 $29,000 $49,000 Year 2 18,000 38,000 Year 3 8,000 28,000 Year 4 (1,000) 19,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 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 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Assuming that the desired rate of return is 6%, 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. Present value of net cash flow $fill in the blank 1 Amount to be invested $fill in the blank 2 97,200 Net present value $fill in the blank 3 b. Would management be likely to look with favor on the proposal? Yes The net present value indicates that the return on the proposal is greater than the minimum desired rate of return of 6%
Net Present Value Method The following data are accumulated by Lingle Company in evaluating the purchase of $97,200 of equipment, having a 4 -year useful life: Present Value of $1 at Compound Interest a. Assuming that the desired rate of retum is 6%, determine the net present value for the proposal, Use the table of the present value of minus sign to indicate a negative net present value. b. 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 retum of 6%Step by Step Solution
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