June Co.is evaluating a project requiring a capital expenditure of $619,200.The project has an estimated life of four 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 is 12%.The present value of $1 at compound interest of 12% for 1,2,3,and 4 years is .893,.797,.712,and .636,respectively.
Determine: (a)the average rate of return on investment,giving effect to depreciation on the investment,and (b)the net present value.

Question

June Co.is evaluating a project requiring a capital expenditure of $619,200.The project has an estimated life of four 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 is 12%.The present value of $1 at compound interest of 12% for 1,2,3,and 4 years is .893,.797,.712,and .636,respectively.
Determine: (a)the average rate of return on investment,giving effect to depreciation on the investment,and (b)the net present value.

Quizplus · Accepted Answer

The Answer of June Co.is evaluating a project requiring a capital expenditure of $619,200.The project has an estimated life of four 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 is 12%.The present value of $1 at compound interest of 12% for 1,2,3,and 4 years is .893,.797,.712,and .636,respectively.
Determine: (a)the average rate of return on investment,giving effect to depreciation on the investment,and (b)the net present value.

June CoIs Evaluating a Project Requiring a Capital Expenditure of $619,200