The following data are accumulated by Parker Company in evaluating the purchase

Question

The following data are accumulated by Parker Company in evaluating the purchase of $126,000 of equipment, having a four-year useful life:

Present Value of Net Cash Flow: _____________

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 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162

Explanation / Answer

Present Value of Net Cash Flow =65000*0.870 + 56000*0.756 +42000*0.658+ 25000*0.572 =$140,822 Less amount to be invested: $126,000 Net present value:14822

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