Determine the net present value for the proposal

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Net Present Value Method

The following data are accumulated by Reynolds Company in evaluating the purchase of $137,200 of equipment, having a four-year useful life:

 

Net Income

Net Cash Flow

Year 1

$38,000

$65,000

Year 2

24,000

50,000

Year 3

11,000

38,000

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

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

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.

Reference no: EM131562747

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