The following data are accumulated by equipment, having a 4-year useful life: Year 1 Year 2 Year 3 Net Income $48,500 24,500 17,000 lold Net Cash Flow $81,000 57,000 49,500 20. 500
The following data are accumulated by equipment, having a 4-year useful life: Year 1 Year 2 Year 3 Net Income $48,500 24,500 17,000 lold Net Cash Flow $81,000 57,000 49,500 20. 500
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
ChapterMB: Model-building Problems
Section: Chapter Questions
Problem 14M
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Question
4
![Net Present Value Method
The following data are accumulated by Waiola Company in evaluating the purchase of $130,000 of
equipment, having a 4-year useful life:
Net Income Net Cash Flow
$81,000
57,000
49,500
38,500
Year 1
$48,500
Year 2
24,500
Year 3
17,000
Year 4
(6,000)
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.
X
Open spreadsheet
a. Assuming that the desired rate of return is 6%, determine the net present value for the proposal.
If required, round to the nearest dollar.
10,815 X
Net present value $
b. Would management be likely to look with favor on the proposal?
Yes, because the net present value indicates that the return on the proposal is greater
than the minimum desired rate of return of 6%.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9b07ba7b-8a11-48b2-8871-a47f6c9d0bf5%2Fd2a722fa-6960-422b-902e-de68faf5888f%2F114brob_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Net Present Value Method
The following data are accumulated by Waiola Company in evaluating the purchase of $130,000 of
equipment, having a 4-year useful life:
Net Income Net Cash Flow
$81,000
57,000
49,500
38,500
Year 1
$48,500
Year 2
24,500
Year 3
17,000
Year 4
(6,000)
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.
X
Open spreadsheet
a. Assuming that the desired rate of return is 6%, determine the net present value for the proposal.
If required, round to the nearest dollar.
10,815 X
Net present value $
b. Would management be likely to look with favor on the proposal?
Yes, because the net present value indicates that the return on the proposal is greater
than the minimum desired rate of return of 6%.
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