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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 Wocester Hat Company in evaluating the purchase of $250,000 of equipment, having a four-year useful life with no residual value.

 

Net Income (Loss)

Net Cash Flow

Year 1

$37,500

$100,000

Year 2

27,500

90,000

Year 3

12,500

75,000

Year 4

(2,500)

60,000

Required -

a. Assuming that the desired rate of return is 10%, determine the net present value for the proposal.

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

Reference no: EM132707015

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