The following data are accumulated by Zadok Company in evaluating the purchase of $370,000 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $67,500 $160,000 Year 2 47,500 140,000 Year 3 (12,500) 80,000 Year 4 (12,500) 80,000 a. Assuming that the desired rate of return is 12%, determine the net present value for the proposal. b. Would management be likely to look with favor on the proposal? Explain.
The following data are accumulated by Zadok Company in evaluating the purchase of $370,000 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $67,500 $160,000 Year 2 47,500 140,000 Year 3 (12,500) 80,000 Year 4 (12,500) 80,000 a. Assuming that the desired rate of return is 12%, determine the net present value for the proposal. b. Would management be likely to look with favor on the proposal? Explain.
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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The following data are accumulated by Zadok Company in evaluating the purchase of $370,000 of equipment, having a four-year useful life:
|
|
Net Income |
Net Cash Flow |
|
Year 1 |
$67,500 |
$160,000 |
|
Year 2 |
47,500 |
140,000 |
|
Year 3 |
(12,500) |
80,000 |
|
Year 4 |
(12,500) |
80,000 |
a. Assuming that the desired rate of return is 12%, determine the net present value for the proposal.
b. Would management be likely to look with favor on the proposal? Explain.
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