1 2 3 4 5 6 7 8 9 10 0.943 0.90 0.890 0.82 0.840 0.75 0.792 0.68 0.747 0.62 0.705 0.56 0.665 0.5: 0.627 0.4 0.592 0.4 0.558 0.3 a. Assuming that the desir If required, round to the Present value of net cash f Amount to be invested Net present value b. Would management be The net present value indic
1 2 3 4 5 6 7 8 9 10 0.943 0.90 0.890 0.82 0.840 0.75 0.792 0.68 0.747 0.62 0.705 0.56 0.665 0.5: 0.627 0.4 0.592 0.4 0.558 0.3 a. Assuming that the desir If required, round to the Present value of net cash f Amount to be invested Net present value b. Would management be The net present value indic
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:eBook
1
2
3
4
5
6
7
8
9
10
0.943
0.890
0.840
0.792
0.747
0.705
0.665
0.627
0.592
0.558
0.909
0.826
0.751
0.683
0.621
0.564
0.513
0.467
0.424
0.386
Show Me How
Check My Work
0.893
0.797
0.712
0.636
0.567
0.507
0.452
0.404
0.361
0.322
0.870
0.756
0.658
0.572
0.497
0.432
0.376
0.327
0.284
0.247
0.833
0.694
0.579
0.482
0.402
0.335
0.279
0.233
0.194
0.162
The net present value indicates that the return on the proposal is
G
LUCalor=&inprogress=false
a. Assuming that the desired rate of return is 12%, 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. If required, use the minus sign to indicate a negative net present value.
Present value of net cash flow
Amount to be invested
Net present value
b. Would management be likely to look with favor on the proposal?
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than the minimum desired rate of return of 12%.
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Transcribed Image Text:Net Present Value Method
The following data are accumulated by Lingle Company in evaluating the purchase of $171,800 of equipment, having a 4-year useful life:
Net Cash Flow
Year 1
Year 2
Year 3
Year 4
Year
1
2
3
4
5
6
7
$44,000
27,000
13,000
(1,000)
Present Value of $1 at Compound Interest
10%
8
9
10
6%
Net Income
0.943
0.890
0.840
0.792
0.747
0.705
0.665
0.627
0.592
0.558
Check My Work
0.909
0.826
0.751
0.683
0.621
0.564
0.513
0.467
0.424
0.386
12%
0.893
0.797
0.712
0.636
0.567
0.507
0.452
0.404
0.361
0.322
15%
0.870
0.756
0.658
0.572
0.497
0.432
0.376
0.327
0.284
0.247
$74,000
57,000
43,000
29,000
5
0
20%
0.833
0.694
0.579
0.482
0.402
0.335
0.279
0.233
0.194
0.162
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•
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