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eBook Show Me How Calculator Net Present Value Method The following data are accumulated by Paxton...
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Net Present Value Method
The following data are accumulated by Paxton Company in evaluating
the purchase of $119,000 of equipment, having a four-year useful
life:
Net IncomeNet Cash FlowYear 1$35,000 $60,000 Year
222,000 46,000 Year 311,000 35,000 Year 4(1,000) 23,000 Present
Value of $1 at Compound
InterestYear6%10%12%15%20%10.9430.9090.8930.8700.83320.8900.8260.7970.7560.69430.8400.7510.7120.6580.57940.7920.6830.6360.5720.48250.7470.6210.5670.4970.40260.7050.5640.5070.4320.33570.6650.5130.4520.3760.27980.6270.4670.4040.3270.23390.5920.4240.3610.2840.194100.5580.3860.3220.2470.162
a. Assuming that the desired rate of return is 6%, determine
the net present value for the proposal. Use the table of the
present value of $1 presented above. If required, round to the
nearest dollar. If required, use the minus sign to indicate a
negative net present value.
Present value of net cash flow$Amount to be invested$Net present
value$
b. Would management be likely to look with favor on the
proposal?
The net present value indicates that the return on the proposal
is than the minimum desired rate of return
Solutions
Expert Solution
| Year | Present Value of $1 at 6% | Net Cash Flow | Present Value of Net Cash Flow |
| 1 | 0.9430 | $ 60,000 | $ 56,580 |
| 2 | 0.8900 | $ 46,000 | $ 40,940 |
| 3 | 0.8400 | $ 35,000 | $ 29,400 |
| 4 | 0.7920 | $ 23,000 | $ 18,216 |
| Present Value of Cash Flows | $ 145,136 | ||
| Less amount invested | $ 119,000 | ||
| Net Present Value | $ 26,136 |
(b) Yes, The $26136 net present value indicates that the return on the proposal is greater than the minimum desired rate of return 6%
ekkarill92 answered 2 years agoRelated Solutions
Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase...
Net Present Value Method
The following data are accumulated by Paxton Company in
evaluating the purchase of $128,700 of equipment, having a
four-year useful life:
Net Income
Net Cash Flow
Year 1
$36,000
$61,000
Year 2
22,000
47,000
Year 3
11,000
35,000
Year 4
(1,000)
24,000
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...
Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase...
Net Present Value
Method
The following data are
accumulated by Paxton Company in evaluating the purchase of $98,100
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...
Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase...
Net Present Value Method
The following data are accumulated by Paxton Company in
evaluating the purchase of $129,200 of equipment, having a
four-year useful life:
Net Income
Net Cash Flow
Year 1
$38,000
$64,000
Year 2
23,000
49,000
Year 3
11,000
37,000
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...
Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase...
Net Present Value Method
The following data are accumulated by Paxton Company in
evaluating the purchase of $98,100 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...
eBook Calculator Net Present Value Method, Present Value Index, and Analysis for a service company Continental...
eBook
Calculator
Net Present Value Method, Present Value Index, and Analysis for
a service company
Continental Railroad Company is evaluating three capital
investment proposals by using the net present value method.
Relevant data related to the proposals are summarized as
follows:
Maintenance
Equipment
Ramp
Facilities
Computer
Network
Amount to be invested
$996,044
$583,354
$311,735
Annual net cash flows:
Year 1
413,000
277,000
190,000
Year 2
384,000
249,000
131,000
Year 3
351,000
222,000
95,000
Present Value of $1 at Compound
Interest...
Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase...
Net Present Value Method
The following data are accumulated by Geddes Company in
evaluating the purchase of $153,200 of equipment, having a
four-year useful life:
Net Income
Net Cash Flow
Year 1
$44,000
$75,000
Year 2
27,000
58,000
Year 3
13,000
44,000
Year 4
(1,000)
29,000
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...
Net Present Value Method The following data are accumulated by Reynolds Company in evaluating the purchase...
Net Present Value Method
The following data are accumulated by Reynolds Company in
evaluating the purchase of $107,700 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...
eBook Show Me How Calculator Determine the amount of sales (units) that would be necessary under...
eBook
Show Me How
Calculator
Determine the amount of sales (units) that would be necessary
under
Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 99,900 units at
a price of $78 per unit during the current year. Its income
statement for the current year is as follows:
Sales
$7,792,200
Cost of goods sold
3,848,000
Gross profit
$3,944,200
Expenses:
Selling expenses
$1,924,000
Administrative expenses
1,924,000
Total expenses
3,848,000
Income from operations
$96,200
The division of...
eBook Show Me How Calculator Print Item Determine the amount of sales (units) that would be...
eBook
Show Me How
Calculator
Print Item
Determine the amount of sales (units) that would be necessary
under
Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 91,800 units at
a price of $129 per unit during the current year. Its income
statement for the current year is as follows:
Sales
$11,842,200
Cost of goods sold
5,848,000
Gross profit
$5,994,200
Expenses:
Selling expenses
$2,924,000
Administrative expenses
2,924,000
Total expenses
5,848,000
Income from operations
$146,200
The...
1. The following data are accumulated by Paxton Company in evaluating the purchase of $127,800 of...
1. The following data are accumulated by Paxton Company in
evaluating the purchase of $127,800 of equipment, having a
four-year useful life:
Net Income
Net Cash Flow
Year 1
$30,000
$50,000
Year 2
18,000
39,000
Year 3
9,000
29,000
Year 4
(1,000)
20,000
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...
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