The following data are accumulated by Lindquist Company in evaluating the purchase of $100,000 of equipment, having a four-year useful life:

a. Assuming that the desired rate of return is 15%, determine the net present value for the proposal. Use the table of the present value of $1 appearing in Exhibit 1 of this chapter.
b. Would management be likely to look with favor on the proposal?Explain.

Transcribed Image Text:

Year 1 Year 2 Year 3 Year 4 Net Income $65,000 60,000 35,000 10,000 Net Cash Flow $90,000 85,000 60,000 35,000