# Transcribed Image Text: a. Assuming that the desired rate of return is 20%, determine the net present value for the proposal. Use the table of the present value of $1

Transcribed Image Text: a. Assuming that the desired rate of return is 20%, determine the net present value for the proposal. Use the table of the present value of $1 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

174,520 x

Amount to be invested

150,000 x

Net present value

24,520 x

b. Would management be likely to look with favor on the proposal?

Yes v

because the net present value indicates that the return on the proposal is greater v than the minimum desired rate of return of 20%. Transcribed Image Text: The following data are accumulated by Geddes Company in evaluating the purchase of $99,000 of equipment, having a four-year useful life:

Net Income

Net Cash Flow

Year 1

$38,000

$64,000

Year 2

23,000

49,000

Year 3

11,000

37,000

Year 4

(1,000)

25,000

Present Value of $1 at Compound Interest

Year

6%

10%

12%

15%

20%

1

0.943

0.909

0.893

0.870

0.833

2

0.890

0.826

0.797

0.756

0.694

3

0.840

0.751

0.712

0.658

0.579

4

0.792

0.683

0.636

0.572

0.482

5

0.747

0.621

0.567

0.497

0.402

0.705

0.564

0.507

0.432

0.335

7

0.665

0.513

0.452

0.376

0.279

8

0.627

0.467

0.404

1.40

0.327

0.233

9

0.592

0.424

0.361

0.284

0.194

10

0.558

0.386

0.322

0.247

0.162

a. Assuming that the desired rate of return is 20%, determine the net present value for the proposal. Use the table of the present value of $1 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

174,520 x

Amount to be invested

150,000 x

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