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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

Essentials Of Investments
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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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%.
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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