Net Present Value Method
The following data are accumulated by Reynolds Company inevaluating the purchase of $122,600 of equipment, having afour-year useful life:
Net Income Net Cash Flow Year 1 $41,000 $69,000 Year 2 25,000 53,000 Year 3 12,000 40,000 Year 4 (1,000) 27,000
Present Value of $1 at CompoundInterest 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 is20%, determine the net present value for the proposal. Use thetable of the present value of $1 presented above. If required,round to the nearest dollar.
Present value of net cash flow $ Less amount to be invested $ Net present value $
Net Present Value Method
The following data are accumulated by Reynolds Company inevaluating the purchase of $122,600 of equipment, having afour-year useful life:
| Net Income | Net Cash Flow | |||
| Year 1 | $41,000 | $69,000 | ||
| Year 2 | 25,000 | 53,000 | ||
| Year 3 | 12,000 | 40,000 | ||
| Year 4 | (1,000) | 27,000 | ||
| Present Value of $1 at CompoundInterest | |||||
| 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 is20%, determine the net present value for the proposal. Use thetable of the present value of $1 presented above. If required,round to the nearest dollar.
| Present value of net cash flow | $ |
| Less amount to be invested | $ |
| Net present value | $ |
Related questions
The following data are accumulated by Reynolds Company inevaluating the purchase of $132,100 of equipment, having afour-year useful life:
| NetIncome | Net CashFlow | |||
| Year 1 | $34,000 | $57,000 | ||
| Year 2 | 21,000 | 44,000 | ||
| Year 3 | 10,000 | 33,000 | ||
| Year 4 | (1,000) | 22,000 | ||
| Present Valueof $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 is12%, determine the net present value for the proposal. Use thetable of the present value of $1 presented above. If required,round to the nearest dollar.
| Present value of net cash flow | $ |
| Less amount to be invested | $ |
| Net present value | $ |
Net Present Value Method
The following data are accumulated by Reynolds Company inevaluating the purchase of $158,800 of equipment, having afour-year useful life:
| NetIncome | Net CashFlow | |||
| Year 1 | $39,000 | $66,000 | ||
| Year 2 | 24,000 | 51,000 | ||
| Year 3 | 11,000 | 38,000 | ||
| Year 4 | (1,000) | 26,000 | ||
| Present Valueof $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 is10%, determine the net present value for the proposal. Use thetable of the present value of $1 presented above. If required,round to the nearest dollar.
| Present value of net cash flow | $ |
| Less amount to be invested | $ |
| Net present value | $ |
b. Would management be likely to look withfavor on the proposal?
SelectYesNoItem 4
The net present value indicates that the return on the proposalis SelectgreaterlessItem 5 than the minimum desired rate of returnof 10%.
Net Present Value Method
The following data are accumulated by Reynolds Company in evaluating the purchase of $113,800 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 | $ |
| Less amount to be invested | $ |
| Net present value | $ |
b. Would management be likely to look with favor on the proposal?
SelectYesNoItem 4
The net present value indicates that the return on the proposal is SelectgreaterlessItem 5 than the minimum desired rate of return of 20%.
