The following data are accumulated by Lingle Company in evaluating the purchase of $180,000 of equipment having a 4-year useful life:   Net Income Net Cash Flow  Year 1 $51,000   $96,000   Year 2 33,000   78,000   Year 3 15,000   60,000   Year 4 3,000   48,000   Assuming that the desired rate of return is 15%, determine the net present value for the proposal. Use the table of the present value of $1 appearing in Exhibit 2 of this chapte

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.