The following data are accumulated by Geddes Company in evaluating the purchase of $124,100 of equipment, having a four-year useful life Net Cash Flow Year 1 Year 2 Year 3 Year 4 Year 1 N 3 4 in 5 6 Net Income $35,000 21,000 10,000 (1,000) Present Value of $1 at Compound Interest 6% 0.943 0.909 0.890 0.840 0.792 0.747 0.705 10% 12% 15% 20% 0.893 0.870 0.833 0.694 $59,000 45,000 34,000 23,000 0.826 0.797 0.756 0.751 0.712 0.683 0.636 0.621 0.567 0.564 0.507 0.432 0.658 0.579 0.572 0.482 0.497 0.402 0.335
The following data are accumulated by Geddes Company in evaluating the purchase of $124,100 of equipment, having a four-year useful life Net Cash Flow Year 1 Year 2 Year 3 Year 4 Year 1 N 3 4 in 5 6 Net Income $35,000 21,000 10,000 (1,000) Present Value of $1 at Compound Interest 6% 0.943 0.909 0.890 0.840 0.792 0.747 0.705 10% 12% 15% 20% 0.893 0.870 0.833 0.694 $59,000 45,000 34,000 23,000 0.826 0.797 0.756 0.751 0.712 0.683 0.636 0.621 0.567 0.564 0.507 0.432 0.658 0.579 0.572 0.482 0.497 0.402 0.335
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:Net Present Value Method
The following data are accumulated by Geddes Company in evaluating the purchase of $124,100 of equipment, having a four-year useful life:
Net Cash Flow
Year 1
Year 2
Year 3
Year 4
Year
1
2
3
4
5
6
7
8
9
10
$35,000
21,000
10,000
(1,000)
Present Value of $1 at Compound Interest
6%
Net Income
0.943
0.890
0.840
0.792
0.747
0.705
0.665
0.627
0.592
0.558
10%
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
15%
0.870
S
0.756
0.658
0.572
$59,000
45,000
34,000
23,000
20%
0.833
0.694
0.579
0.482
0.636
0.567 0.497 0.402
0.507
0.432
0.335
0.452
0.376
0.279.
0.404
0.327
0.233
0.361
0.284
0.194
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, round to the nearest dollar.
Present value of net cash flow
Amount to be invested
Net present value
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