Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase of $133,400 of equipment, having a four-year useful life: Net Income Net Cash Flow $41,000 $69,000 Year 1 Year 2 Year 3 Year 4 25,000 12,000 (1,000) 53,000 40,000 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 2 0.890 0.826 0.797 0.756 0.694 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 0.70s 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.3270.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. 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 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 6 7 0.665 0.513 0.452 0.376 0.279 8 9 10 0.558 0.386 0.322 0247 0.162 0.705 0.564 0.507 0.432 0.335 0.627 0.467 0.404 0.327 0.233 0.592 0.424 0.361 0.284 0.194 a. 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 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 proposalr The net present value indicates that the return on the proposal is return of 15%. greater than the minimum desired rate of