BOOK Show Me How Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase of $190,900 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $44,000 $75,000 Year 2 27,000 58,000 Year 3 13,000 44,000 Year 4 (1,000) 29,000 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 N 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 6 0.705 0.564 0.507 0.432 0.335 7 0.513 0.452 0.376 0.279 0.665 0.6 8 0.467 0.404 0.327 0.233 0.194 9 0.592 0.424 0.361 0.284 10 0.558 0.386 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. If required, use the minus sign to indicate a negative net present value. Present value of net cash flow Amount to be invested Net present value b. Would management be likely to look with favor on the proposal? than the minimum desired The net present value indicates that the return on the proposal is rate of return of 10%