Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $158,800 of equipment, having a four-year useful life: Year 1 Year 2 Year 3 Year 4 Net Income Net Cash Flow $39,000 $66,000 24,000 51,000 11,000 38,000 (1,000) 26,000 Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% Year 1 0 0.833 .943 0.890 0.893 0.797 0.712 0.870 0.756 0.909 0.826 0.751 0.683 0.694 0.840 0.658 0.579 0.792 0.636 0.482 7 8 0.747 0.705 0.665 0.627 0.592 .558 0.621 0.564 0.513 0.467 0.424 0.386 0.567 0.507 0.452 0.404 0.361 0.322 0.572 0.497 0.432 0.376 0.327 0.284 0.247 0.402 0.335 0.279 0.233 0.194 0.162 10 0 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. 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? No , because the net present value indicates that the return on the proposal is less than the minimum desired rate of return of 10%