The following data are accumulated by Waiola Company in evaluating the purchase of $118,900 of equipment,...

 

Transcribed Image Text:

The following data are accumulated by Waiola Company in evaluating the purchase of $118,900 of equipment, having a 4-year useful life: Net Income Net Cash Flow $34,000 $58,000 21,000 45,000 10,000 34,000 (1,000) Year 1 Year 2 Year 3 Year 4 Year 1 2 3 4 5 6 7 8 9 10 Present Value of $1 at Compound Interest 6% 10% 12% 0.943 0.890 0.840 0.792 0.747 0.621 0.705 0.564 0.665 0.513 0.627 0.467 0.592 0.558 0.909 0.826 0.751 0.683 0.636 Net present value 23,000 0.424 0.386 15% 0.893 0.870 0.797 0.756 0.712 0.658 0.567 0.497 0.507 0.432 0.452 0.404 0.361 0.322 20% 0.833 0.694 0.572 0.482 0.402 0.335 0.279 0.233 0.194 0.162 0.376 0.327 0.284 0.247 0.579 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. Present value of net cash flow Amount to be invested The following data are accumulated by Waiola Company in evaluating the purchase of $118,900 of equipment, having a 4-year useful life: Net Income Net Cash Flow $34,000 $58,000 21,000 45,000 10,000 34,000 (1,000) Year 1 Year 2 Year 3 Year 4 Year 1 2 3 4 5 6 7 8 9 10 Present Value of $1 at Compound Interest 6% 10% 12% 0.943 0.890 0.840 0.792 0.747 0.621 0.705 0.564 0.665 0.513 0.627 0.467 0.592 0.558 0.909 0.826 0.751 0.683 0.636 Net present value 23,000 0.424 0.386 15% 0.893 0.870 0.797 0.756 0.712 0.658 0.567 0.497 0.507 0.432 0.452 0.404 0.361 0.322 20% 0.833 0.694 0.572 0.482 0.402 0.335 0.279 0.233 0.194 0.162 0.376 0.327 0.284 0.247 0.579 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. Present value of net cash flow Amount to be invested

Answer rating: 100% (QA)

To determine the net present value NPV for the proposal at a desired rate of return of 12 you need t... View the full answer