Net Present Value MethodThe following data are accumulated by Wocester Hat Company in evaluating the purchase of $129,100 of equipment, having a four-year useful life:Net Income (Loss)Net Cash FlowsYear 1$41,000$70,000Year 225,00054,000Year 312,00041,000Year 4(1,000)27,000Present Value of $1 at Compound InterestYear6%10%12%15%20%0.9430.9090.8930.8700.8330.8900.8260.7970.7560.6940.8400.7510.7120.6580.57940.7920.6830.6360.5720.4820.7470.6210.5670.4970.4020.7050.5640.5070.4320.3350.6650.5130.4520.3760.27980.6270.4670,4040.3270.2336.0.5920.4240.3610.2840.194Check My WorkFmail InetrurterSave and EvitCuhmit AeeianmaSign out ebookE Print Item0.8900.8260.797U.7560.6940.8400.7510.7120.6580.5794.0.7920.6830.6360.5720.4820.7470.6210.5670.4970.4026.0.7050.5640.5070.4320.33570.6650.5130.4520.3760.2790.6270.4670.4040.3270.2330.5920.4240.3610.2840.194100.5580.3860.3220.2470.162a. Assuming that the desired rate of return is 10%, determine the net present value for the proposal. Use the table of the present value of $1 presented above. If required, use theminus sign to indicate a negative net present value.Present value of net cash flowAmount to be investedNet present valueb. Would management be likely to look with favor on the proposal?Yes vFeedbackCheck My WorkNextCheck My Work.Cau and EviSuhmit Aeeinnm ant for GradingEmail IneteetarSign outO A 12:

Net Present Value Method The following data are accumulated by Wocester Hat Company in evaluating the purchase of $129,100 of equipment, having a four-year useful life: Net Income (Loss) Net Cash Flows Year 1 $41,000 $70,000 Year 2 25,000 54,000 Year 3 12,000 41,000 Year 4 (1,000) 27,000

Net Present Value Method The following data are accumulated by Wocester Hat Company in evaluating the purchase of $129,100 of equipment, having a four-year useful life: Net Income (Loss) Net Cash Flows Year 1 $41,000 $70,000 Year 2 25,000 54,000 Year 3 12,000 41,000 Year 4 (1,000) 27,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Net Present Value Method
The following data are accumulated by Wocester Hat Company in evaluating the purchase of $129,100 of equipment, having a four-year useful life:
Net Income (Loss)
Net Cash Flows
Year 1
$41,000
$70,000
Year 2
25,000
54,000
Year 3
12,000
41,000
Year 4
(1,000)
27,000
Present Value of $1 at Compound Interest
Year
6%
10%
12%
15%
20%
0.943
0.909
0.893
0.870
0.833
0.890
0.826
0.797
0.756
0.694
0.840
0.751
0.712
0.658
0.579
4
0.792
0.683
0.636
0.572
0.482
0.747
0.621
0.567
0.497
0.402
0.705
0.564
0.507
0.432
0.335
0.665
0.513
0.452
0.376
0.279
8
0.627
0.467
0,404
0.327
0.233
6.
0.592
0.424
0.361
0.284
0.194
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0.890
0.826
0.797
U.756
0.694
0.840
0.751
0.712
0.658
0.579
4.
0.792
0.683
0.636
0.572
0.482
0.747
0.621
0.567
0.497
0.402
6.
0.705
0.564
0.507
0.432
0.335
7
0.665
0.513
0.452
0.376
0.279
0.627
0.467
0.404
0.327
0.233
0.592
0.424
0.361
0.284
0.194
10
0.558
0.386
0.322
0.247
0.162
a. Assuming that the desired rate of return is 10%, determine the net present value for the proposal. Use the table of the present value of $1 presented above. 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?
Yes v
Feedback
Check My Work
Next
Check My Work.
Cau and Evi
Suhmit Aeeinnm ant for Grading
Email Ineteetar
Sign out
O A 12:

Expert Solution

Step 1

Net present value means the difference between the present value of cash inflow and present value of cash outflow.

If it is positive , then project should be accepted , otherwise rejected.

Necessary calculations has been made.

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Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase of $98,400 of equipment, having a four-year useful life: 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 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 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. If required, use the minus sign to indicate a negative net present value.…