The following data are accumulated by Zadok Company in evaluating the purchase of $370,000 of equipment, having a four year useful life:

 

Net Income

Net Cash Flow

Year 1

$67,500

$160,000

Year 2

47,500

140,000

Year 3

(12,500)

80,000

Year 4

(12,500)

80,000

a. Assuming that the desired rate of return is 12%, determine the net present value for the proposal.

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