Net Present Value Method The following data are accumulated by Paxton Company in evaluating the purchase of $124,900 of equipment, having a four-year useful life: Net Income Net Cash Flow $44,000 $74,000 Year 1 57,000 Year 2 27,000 Year 3 13,000 43,000 (1,000) 29,000 Year 4 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 0.756 2 0.890 0.826 0.797 0.694 3 0.840 0.751 0.712 0.658 0.579 0.792 0.683 4 0.636 0.572 0.482 0.497 5 0.747 0.621 0.567 0.402 6 0.705 0.564 0.507 0.432 0.335 .376 0.665 0.5 .279 0.627 0.467 0.404 0.327 0.233 0.284 0.592 0.424 0.361 0.194 10 0.558 0.386 0.322 0.247 0.162 LO co a. Assuming that the desired rate of return is 15%, 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 Amoupt binvested Yes alue Net pr No agement be likely to look with favor on the proposal? b. Wo The net present value indicates that the return on the proposal is than the minimum desired rate of return of 15%.

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A product manager prepared the following forecasts for a product line: 1 3 4 5 6 and later 2 + $2m $2m $3m $4m $4m g=2.5% If the appropriate discount rate is 8.5%, what is the present value of these future cash flows?

a. Find the present values of the following cash flow streams at an 8% discount rate. Do not round intermediate calculations. Round your answers to the nearest cent.   0 1 2 3 4 5                             Stream A $0 $100 $350 $350 $350 $300 Stream B $0 $300 $350 $350 $350 $100 Stream A: $   Stream B: $   b. What are the PVs of the streams at a 0% discount rate? Round your answers to the nearest dollar. Stream A: $   Stream B: $

a. Find the present values of the following cash flow streams at a 6% discount rate. Do not round intermediate calculations. Round your answers to the nearest cent. 1 3 4 Stream A $0 $150 $400 $400 $400 $300 Stream B $0 $300 $400 $400 $400 $150 Stream A: $ Stream B: $ b. What are the PVs of the streams at a 0% discount rate? Round your answers to the nearest dollar. Stream A: $ Stream B: $

Determine the present value of the following single amounts. Note: Use tables, Excel, or a financial calculator. Round your final answers to nearest whole dollar amount. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) 1. 2 3. 4. Future Amount $ $ $ $ 32,000 26,000 37,000 52,000 i= 5% 6% 11% 10% n = 11 19 40 13 Present Value

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Net Present Value Use Exhibit 128.1 and Exhibit 128.2 to locate the present value of an annuity of $1, which is the amount to be multiplied times the future annual cash flow amount. Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. a. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $2,650,000 and will lam 10 years. b. Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $180,000. She estimates that the return from owning her own sta will be $35,000 per year. She estimates that the shop will have a useful life of 6 years. c. Barker Company calculated the NPV of a project and found it to be $63,900. The project's life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10%. The project was expected to produce annual after-tax cash flows of $135,000. Required: 1.…

4.  For the proposals accepted for further analysis in part (3), compute the net present value. Use a rate of 12% and the present value of $1 table above. Round to the nearest dollar.