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The following data are accumulated by Geddes Company in evaluating the purchase of $130,000 of...

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Accounting

The following data are accumulated by Geddes Company in evaluating the purchase of $130,000 of equipment, having a four-year useful life:

Net Income Net Cash Flow
Year 1 $49,000 $81,500
Year 2 24,500 57,000
Year 3 13,000 45,500
Year 4 7,000 39,500

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

Open spreadsheet

  1. Assuming that the desired rate of return is 15%, determine the net present value for the proposal. If required, round to the nearest dollar.

    Net present value $

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

    Yes , the net present value indicates that the return on the proposal is greater than the minimum desired rate of return of 15%.

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