Net present value methodThe following data are accumulated by Geddes Company in evaluating the purchase of $140,000 of equipment, having a four-year useful life: Net IncomeNet Cash FlowYear 1$42,500 $77,500 Year 221,500 56,500 Year 315,500 50,500 Year 46,500 41,500 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.Assuming that the desired rate of return is 6%, determine the net present value for the proposal. If required, round to the nearest dollar.Net present value$fill in the blank 2Would management be likely to look with favor on the proposal? , the net present value indicates that the return on the proposal is than the minimum desired rate of return of 6%. Net present value methodThe following data are accumulated by Geddes Company in evaluating thepurchase of equipment, having a four-year useful life:DATANet Income Net Cash Flow$42,50021,50015,5006,500Year 1$77,50056,50050,50041,500Year 2Year 3Year 4Cost of equipment$140,0006%Desired rate of returnUSIng iomuias anu celiTelerences, penom he Tequileu anaiysis, anuinput your answer into the Amount column. Transfer the numeric result forthe green entry cell (D18) into the appropriate fields in CNOWV2 forAmountFormulaa. Net present value

Present value of investment=Equipment value×PVIF@6%,0 years=$140,000×1=$140,000

Answered: The following data are accumulated by…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 7E

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Net present value method

The following data are accumulated by Geddes Company in evaluating the purchase of $140,000 of equipment, having a four-year useful life:

	Net Income	Net Cash Flow
Year 1	$42,500		$77,500
Year 2	21,500		56,500
Year 3	15,500		50,500
Year 4	6,500		41,500

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

Assuming that the desired rate of return is 6%, determine the net present value for the proposal. If required, round to the nearest dollar.

Net present value $fill in the blank 2
Would management be likely to look with favor on the proposal?

, the net present value indicates that the return on the proposal is than the minimum desired rate of return of 6%.

Net present value method
The following data are accumulated by Geddes Company in evaluating the
purchase of equipment, having a four-year useful life:
DATA
Net Income Net Cash Flow
$42,500
21,500
15,500
6,500
Year 1
$77,500
56,500
50,500
41,500
Year 2
Year 3
Year 4
Cost of equipment
$140,000
6%
Desired rate of return
USIng iomuias anu celiTelerences, penom he Tequileu anaiysis, anu
input your answer into the Amount column. Transfer the numeric result for
the green entry cell (D18) into the appropriate fields in CNOWV2 for
Amount
Formula
a. Net present value

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