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 Exhibit 1 of this chapter.(b) Would management be likely to look with favor on the proposal?Explain.

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Net Cash Flow $64,000 49,000 37,000 25,000 Net Income Year 1 Year 2 Year 3 $38,000 23,000 11,000 (1,000) Year 4