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.