Net present value method

The following data are accumulated by Waiola Company in evaluating the purchase of $$150,900$ of equipment, having a $4-$year useful life:

Year Net Income Net Cash Flow

Year $1$ $$44,000$ $$74,000$

Year $227,00057,000$

Year $313,00043,000$

Year $4(1,000)29,000$

Present Value of $$1$ at Compound Interest

Year $6\%10\%12\%15\%20\%$

$10\mathrm{.}9430\mathrm{.}9090\mathrm{.}8930\mathrm{.}8700\mathrm{.}833$

$20\mathrm{.}8900\mathrm{.}8260\mathrm{.}7970\mathrm{.}7560\mathrm{.}694$

$30\mathrm{.}8400\mathrm{.}7510\mathrm{.}7120\mathrm{.}6580\mathrm{.}579$

$40\mathrm{.}7920\mathrm{.}6830\mathrm{.}6360\mathrm{.}5720\mathrm{.}482$

$50\mathrm{.}7470\mathrm{.}6210\mathrm{.}5670\mathrm{.}4970\mathrm{.}402$

$60\mathrm{.}7050\mathrm{.}5640\mathrm{.}5070\mathrm{.}4320\mathrm{.}335$

$70\mathrm{.}6650\mathrm{.}5130\mathrm{.}4520\mathrm{.}3760\mathrm{.}279$

$80\mathrm{.}6270\mathrm{.}4670\mathrm{.}4040\mathrm{.}3270\mathrm{.}233$

$90\mathrm{.}5920\mathrm{.}4240\mathrm{.}3610\mathrm{.}2840\mathrm{.}194$

$100\mathrm{.}5580\mathrm{.}3860\mathrm{.}3220\mathrm{.}2470\mathrm{.}162$

a$.$ Assuming that the desired rate of return is $12\%,$ 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.

Line Item Description Amount

Present value of net cash flow $fill in the blank $1$

Amount to be invested fill in the blank $2$

Net present value $fill in the blank $3$

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

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

than the minimum desired rate of return of $12\%.$