Homework SourseNet Present Value Method The following data are accumulated
Net Present Value Method
The following data are accumulated by Reynolds Company in evaluating the purchase of $128,400 of equipment, having a four-year useful life:
a. Assuming that the desired rate of return is 20%, 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.
b. Would management be likely to look with favor on the proposal?
SelectYesNoItem 4
The net present value indicates that the return on the proposal is SelectgreaterlessItem 5 than the minimum desired rate of return of 20%.
| Net Income | Net Cash Flow | |||
| Year 1 | $37,000 | $63,000 | ||
| Year 2 | 23,000 | 49,000 | ||
| Year 3 | 11,000 | 37,000 | ||
| Year 4 | (1,000) | 25,000 |
