The following data are accumulated by Geddes Company in evaluating the purchase of $140,000 of equipment, having a four-year useful life: Net Income Net Cash Flow $77,000 61,000 54,500 39,500 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. Year 1 Year 2 Year 3 Year 4 ✔, the net present value indicates that the return on the proposal is greater $42,000 26,000 19,500 4,500 Open spreadsheet a. Assuming that the desired rate of return is 20%, determine the net present value for the proposal. If required, round to the nearest dollar. Net present value 17,116 ✔ b. Would management be likely to look with favor on the proposal? Yes ✔than the minimum desired rate of return of 20%.
The following data are accumulated by Geddes Company in evaluating the purchase of $140,000 of equipment, having a four-year useful life: Net Income Net Cash Flow $77,000 61,000 54,500 39,500 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. Year 1 Year 2 Year 3 Year 4 ✔, the net present value indicates that the return on the proposal is greater $42,000 26,000 19,500 4,500 Open spreadsheet a. Assuming that the desired rate of return is 20%, determine the net present value for the proposal. If required, round to the nearest dollar. Net present value 17,116 ✔ b. Would management be likely to look with favor on the proposal? Yes ✔than the minimum desired rate of return of 20%.
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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Uy.
walk me through this please?
I understand part a:
77000 x .833
61000 x .694
54500 x .579
39500 x .482
157k~ - 140k= 17,116
on b: how its it best to do the math to check?
Transcribed Image Text:Net present value method
The following data are accumulated by Geddes Company in evaluating the purchase of $140,000 of equipment, having a four-year useful life:
Net Income
Net Cash Flow
Year 1
$77,000
Year 2
61,000
Year 3
54,500
Year 4
39,500
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.
Open spreadsheet
a. Assuming that the desired rate of return is 20%, determine the net present value for the proposal. If required, round to the nearest dollar.
17,116 ✓
Net present value
b. Would management be likely to look with favor on the proposal?
Yes
Feedback
$42,000
26,000
19,500
4,500
✓, the net present value indicates that the return on the proposal is greater
✓than the minimum desired rate of return of 20%.
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