Net Present Value MethodThe following data are accumulated by Paxton Company in evaluating the purchase of $124,900 of equipment, having a four-year useful life:Net IncomeNet Cash Flow$44,000$74,000Year 157,000Year 227,000Year 313,00043,000(1,000)29,000Year 4Present Value of $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.8330.75620.8900.8260.7970.69430.8400.7510.7120.6580.5790.7920.68340.6360.5720.4820.49750.7470.6210.5670.40260.7050.5640.5070.4320.335.3760.6650.5.2790.6270.4670.4040.3270.2330.2840.5920.4240.3610.194100.5580.3860.3220.2470.162LOco 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 $1presented 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 flowAmoupt binvestedYesalueNet prNoagement be likely to look with favor on the proposal?b. WoThe net present value indicates that the return on the proposal isthan the minimum desired rate of return of 15%.

a. Compute present value of net cash flow, amount to be invested and net present value for the…

Answered: Net Present Value Method The following…

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter7: Fixed Assets, Natural Resources, And Intangible Assets

Section: Chapter Questions

Problem 7.3.3MBA

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Net present value method The following data are accumulated by Waiola Company in evaluating the purchase of $172,300 of equipment, having a 4-year useful life: Net Income Net Cash Flow $68,000 52,000 39,000 27,000 Year 1 Year 2 Year 3 Year 4 Year 1 2 3 4 5 6 7 8 9 10 Present Value of $1 at Compound Interest 6% 10% 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 $40,000 24,000 12,000 (1,000) Amount to be invested 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 I 0.424 0.386 Present value of net cash flow 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 a. Assuming that the desired rate of return is 10%, 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. 0.194 0.162 172,300 X…
Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $150,000 of equipment, having a four-year useful life: Net Cash Flow Year 1 Year 2 Year 3 Year 4 Year 1 2 3 4 5 6 7 8 9 10 6% 0.943 0.890 0.840 0.792 0.747 0.705 Present Value of $1 at Compound Interest 10% 0.665 0.627 0.592 Net Income 0.558 $42,500 27,500 12,500 2,500 0.909 0.826 0.751 0.683 d621 0.564 0.513 0.467 0.424 0.386 12% 15% 20% 0.870 0.833 0.797 0.756 0.694 0.712 0.658 0.579 0.636 0.572 0.482 0.567 0.497 0.402 0.432 0.335 0.376 0.279 0.327 0.233 0.194 0.162 0.893 0.507 0.452 $80,000 65,000 50,000 40,000 0.404 0.361 0.322 0.284 0.247
Show Me How Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $118,900 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $34,000 $58,000 Year 2 21,000 45,000 Year 3 10,000 34,000 Year 4 (1,000) 23,000 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 6 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 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 12%, 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. Present value of net cash flow $fill in the blank 1…
Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase of $131,700 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $44,000 $74,000 Year 2 27,000 57,000 Year 3 13,000 43,000 Year 4 (1,000) 29,000 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 6 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 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 12%, 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.…
Net Present Value Method The following data are accumulated by Lingle Company in evaluating the purchase of $171,800 of equipment, having a 4-year useful life: Net Cash Flow Year 1 Year 2 Year 3 Year 4 Year 1 2 3 4 5 6 7 $44,000 27,000 13,000 (1,000) Present Value of $1 at Compound Interest 10% 8 9 10 6% Net Income 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 Check My Work 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 $74,000 57,000 43,000 29,000 5 0 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 Print Item • take Previous Dec 8
Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase of $129,100 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $41,000 $70,000 Year 2 25,000 54,000 Year 3 12,000 41,000 Year 4 (1,000) 27,000 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 6 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 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 10%, 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.…
Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase of $82,600 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $31,000 $53,000 Year 2 19,000 41,000 Year 3 9,000 31,000 Year 4 (1,000) 21,000 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 6 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 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.…
Net present value method The following data are accumulated by Waiola Company in evaluating the purchase of $150,000 of equipment, having a 4-year useful life: Net Income Net Cash Flow $55,000 42,000 32,000 21,000 Year 1 Year 2 Year 3 Year 4 Year 1 2 3 4 5 6 7 8 9 10 0.943 Present Value of $1 at Compound Interest 6% 12% 10% 0.909 0.893 0.870 0.694 0.826 0.797 0.756 0.751 0.683 0.636 0.712 0.658 0.579 0.572 0.482 0.621 0.567 0.497 0.402 0.747 0.705 0.432 0.335 0.564 0.507 0.513 0.452 0.376 0.279 0.665 0.404 0.327 0.233 0.627 0.592 0.467 0.424 0.361 0.558 0.386 0.322 0.284 0.194 0.247 0.162 0.890 0.840 $32,000 20,000 10,000 (1,000) 0.792 15% 20% 0.833 a. Assuming that the desired rate of return is 6%, 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 Amount to be invested Net present…
Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $124,100 of equipment, having a four-year useful life: Net Cash Flow Year 1 Year 2 Year 3 Year 4 Year 1 2 3 4 5 6 7 8 9 10 $35,000 21,000 10,000 (1,000) Present Value of $1 at Compound Interest 6% Net Income 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 12% 0.893 0.797 0.712 15% 0.870 S 0.756 0.658 0.572 $59,000 45,000 34,000 23,000 20% 0.833 0.694 0.579 0.482 0.636 0.567 0.497 0.402 0.507 0.432 0.335 0.452 0.376 0.279. 0.404 0.327 0.233 0.361 0.284 0.194 0.322 0.247 0.162 a. Assuming that the desired rate of return is 10%, 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. Present value of net cash flow Amount to be invested Net present value
Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $158,800 of equipment, having a four-year useful life: Net Income Net Cash FlowYear 1 $44,000 $75,000 Year 2 27,000 58,000 Year 3 13,000 44,000 Year 4 (1,000) 29,000 Present Value of $1 at Compound InterestYear 6% 10% 12% 15% 20%1 0.943 0.909 0.893 0.870 0.8332 0.890 0.826 0.797 0.756 0.6943 0.840 0.751 0.712 0.658 0.5794 0.792 0.683 0.636 0.572 0.4825 0.747 0.621 0.567 0.497 0.4026 0.705 0.564 0.507 0.432 0.3357 0.665 0.513 0.452 0.376 0.2798 0.627 0.467 0.404 0.327 0.2339 0.592 0.424 0.361 0.284 0.19410 0.558 0.386 0.322 0.247 0.162 a. Assuming that the desired rate of return is 10%, 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. Present value of net cash flow $fill in the blank 1Amount to be invested $fill in the blank 2Net present value $fill in the blank 3b. Would…
Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase of $150,000 of equipment having a four-year useful life: Net Income Net Cash Flow Year 1 $ 42,500 $80,000 Year 2 27,500 65,000 Year 3 12,500 50,000 Year 4 2,500 40,000 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 6 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 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 15%, determine the net present value for the proposal. (If required, round to the nearest dollar.) Use the table of the present value of $1 presented above. Present value of net cash flow $…
Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of $94,600 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $31,000 $53,000 Year 2 19,000 41,000 Year 3 9,000 31,000 Year 4 (1,000) 21,000 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 6 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 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. Present value of net cash flow $fill in the blank 1 Amount to be…

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