Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase of $141,100 of equipment, having a four-year useful life: Year 1 Year 2 Year 3 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% 159% 20% Year 4 Year 1 0.943 0.909 0.893 0.870 0.833 0.890 0.694 N 0.826 0.797 0.756 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 0.747 un 0.621 0.567 0.497 0.402 6 0.335 0.705 0.564 0.507 0.432 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.194 0.424 0.361 0.284 10 0.558 0.386 0.322 0.162 0.247 a. Assuming that the desired rate of return is 20%, determine the nat present value for the proposal. Use the table of the present value of si 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 proposal? than the minimum desired rate of return of 204 The net present value indicates that the return on the proposal is