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Determine the net present value for the proposal

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Problem - Net present value method - The following data are accumulated by Parker Company in evaluating the purchase of $126,000 of equipment, having a four-year useful life:

Net Income

Net Cash Flow

Year 1

$33,500

$65,000

Year 2

24,500

56,000

Year 3

10,500

42,000

Year 4

(6,500)

25,000

a. Assuming that the desired rate of return is 15%, determine the net present value for the proposal.

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

Reference no: EM132690503

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