The following data are accumulated by Paxton Company in evaluating the purchase of $150,000 of equipment having a four-year useful life:

Net Income Net Cash Flow

Year 1........................$42,500.....................$80,000

Year 2..........................27,500.......................65,000

Year 3..........................12,500.......................50,000

Year 4...........................2,500.......................40,000

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 appearing in Exhibit 2 of this chapter.

b. Would management be likely to look with favor on the proposal? Explain.