Net present value method The following data are accumulated by Geddes Company in evaluating the purchase of $130,000 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $46,000 $78,500 Year 2 29,000 61,500 Year 3 11,000 43,500 Year 4 5,000 37,500 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Assuming that the desired rate of return is 10%, determine the net present value for the proposal. If required, round to the nearest dollar. Net present value $ Would management be likely to look with favor on the proposal? Yes , the net present value indicates that the return on the proposal is greater than the minimum desired rate of return of 10%.
Net present value method The following data are accumulated by Geddes Company in evaluating the purchase of $130,000 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $46,000 $78,500 Year 2 29,000 61,500 Year 3 11,000 43,500 Year 4 5,000 37,500 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Assuming that the desired rate of return is 10%, determine the net present value for the proposal. If required, round to the nearest dollar. Net present value $ Would management be likely to look with favor on the proposal? Yes , the net present value indicates that the return on the proposal is greater than the minimum desired rate of return of 10%.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The following data are accumulated by Geddes Company in evaluating the purchase of $130,000 of equipment, having a four-year useful life:
| Net Income | Net |
|||
| Year 1 | $46,000 | $78,500 | ||
| Year 2 | 29,000 | 61,500 | ||
| Year 3 | 11,000 | 43,500 | ||
| Year 4 | 5,000 | 37,500 |
This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.
- Assuming that the desired
rate of return is 10%, determine the net present value for the proposal. If required, round to the nearest dollar.Net present value $ - Would management be likely to look with favor on the proposal?
Yes
, the net present value indicates that the return on the proposal isgreater
than the minimum desired rate of return of 10%.
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