Net present value method

The following data are accumulated by Geddes Company in evaluating the purchase of $130,000 of equipment, having a four-year useful life:

	Net Income		Net Cash Flow
Year 1	$46,000		$78,500
Year 2	29,000		61,500
Year 3	11,000		43,500
Year 4	5,000		37,500

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

1. Assuming that the desired rate of return is 10%, determine the net present value for the proposal. If required, round to the nearest dollar.

   Net present value

   $

2. Would management be likely to look with favor on the proposal?

   Yes

   , the net present value indicates that the return on the proposal is

   greater

   than the minimum desired rate of return of 10%.