Vanessa Company is evaluating a project requiring a capital expenditure of $480,000.The project has an estimated life of 4 years and no salvage value.The estimated net income and net cash flow from the project are as follows:

The company's minimum desired rate of return for net present value analysis is 15%.The present value of $1 at compound interest of 15% for 1,2,3,and 4 years is 0.870,0.756,0.658,and 0.572,respectively.
Determine (a)the average rate of return on investment,using straight-line depreciation,and (b)the net present value.

Question

Vanessa Company is evaluating a project requiring a capital expenditure of $480,000.The project has an estimated life of 4 years and no salvage value.The estimated net income and net cash flow from the project are as follows:
​
  The company's minimum desired rate of return for net present value analysis is 15%.The present value of $1 at compound interest of 15% for 1,2,3,and 4 years is 0.870,0.756,0.658,and 0.572,respectively.
Determine (a)the average rate of return on investment,using straight-line depreciation,and (b)the net present value.

Quizplus · Accepted Answer

The Answer of Vanessa Company is evaluating a project requiring a capital expenditure of $480,000.The project has an estimated life of 4 years and no salvage value.The estimated net income and net cash flow from the project are as follows:
​
  The company's minimum desired rate of return for net present value analysis is 15%.The present value of $1 at compound interest of 15% for 1,2,3,and 4 years is 0.870,0.756,0.658,and 0.572,respectively.
Determine (a)the average rate of return on investment,using straight-line depreciation,and (b)the net present value.

Vanessa Company Is Evaluating a Project Requiring a Capital Expenditure