I need help solving this question The following data are accumulated by Paxton Company in evaluating the purchase of $157,200 of equipment, having a four-year useful life:Net IncomeNet Cash FlowYear 1$41,000$69,000Year 225,00053,000Year 312,00040,000Year 4(1,000)27,000Present Value of $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.83320.8900.8260.7970.7560.6940.8400.7510.7120.6580.57940.7920.6830.6360.5720.48250.7470.6210.5670.4970.40260.7050.5640.5070.4320.33570.6650.5130.4520.3760.2798.0.6270.4670.4040.3270.2339.0.5920.4240.3610.2840.194100.5580.3860.3220.2470.162a. Assuming that the desired rate of return is 6%, 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. Ifrequired, use the minus sign to indicate a negative net present value.Present value of net cash flowAmount to be investedNet present valueb. Would management be likely to look with favor on the proposal?The net present value indicates that the return on the proposal isthan the minimum desired rate of return of 6%.

For any project approval for investment , first they calculate NPV whether to go head or not If NPV is positive project shall be accepted, If NPV is negative Project shall be rejected To discount cash flows proper Discount rate to be used to get present value of cash inflows . Formulae for Npv= Present value of cash inflows - present value of cash outflows Year Cash flows Discount factor Discounted cashflows 1 $69000 0.943 $65067 2 $53000 0.890 $47170 3 $40000 0.840 $33600 4 $27000 0.792 $21384 Present value of cash inflows $167221 - outflow ( $157200) NPV $10021 a) Present value of cash inflows $167221 Amount to be invested $157200 NPV $10021 b) Since Npv is positive management can accept the proposal Npv indicates the return of the proposal is positive amount than the minimum desired return.

Business

Accounting

The following data are accumulated by Paxton Company in evaluating the purchase of $157,200 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $41,000 $69,000 Year 2 25,000 53,000 Year 3 Year 4 12,000 40,000 (1,000) 27,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335

The following data are accumulated by Paxton Company in evaluating the purchase of $157,200 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $41,000 $69,000 Year 2 25,000 53,000 Year 3 Year 4 12,000 40,000 (1,000) 27,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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