The following data are accumulated by Reynolds Company in evaluating the

The following data are accumulated by Reynolds Company in evaluating the purchase of $104,000 of equipment, having a four-year useful life:

Net Cash Flow $64,000 49,000 37,000 25,000 Net Income Year 1 Year 2 Year 3 $38,000 23,000 11,000 (1,000) Year 4

(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.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...

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