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

a b Yes The 27370 net present value indicates that the return on the pro ...

The following data are accumulated by Reynolds Company in evaluating the purchase of $104,000 of equipment, having

Question:

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

Net Cash Flow Net Income Year 1 S38,000 $64,000 49,000 Year 2 23,000 11,000 37,000 Year 3 Year 4 (1,000) 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 appearing in Exhibit 1 of this chapter.

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

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...