The following data are accumulated by Reynolds Company in evaluating the purchase of $104,000 of equipment, having a four-year useful life: Net Income

Year 1 $38,000 Year 2 23,000

Year 3 11,000

Year 4 (1,000)

Net Cash Flow

Year 1 = 64,000

Year 2 = 49,000

Year 3 = 37,000

Year 4 = 25,000

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 B.) Would management be likely to look with favor on the proposal? Explain. Present Value of $1 at Compound Interest Year 1 @ 15% = 0.870 Year 2 @ 15% = 0.756 Year 3 @ 15% = 0.712 Year 4 @ 15% = 0.636