Solution-Estimate the average rate of return on investment

Estimate the average rate of return on investment

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Reference no: EM132622134

June Co. is evaluating a project requiring a capital expenditure of $620,000. 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:

Year	Net Income	Net Cash Flow
1	$45,000	$200,000
2	85,000	240,000
3	5,000	160,000
4	15,000	170,000
	$150,000	$770,000

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 0.893, 0.797, 0.712, and 0.636, respectively.

Question a. Determine the average rate of return on investment, giving effect to depreciation on the investment. Round your answers to two decimal places.

Question b. Determine the net present value.

Reference no: EM132622134

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Estimate the average rate of return on investment

Reference no: EM132622134

Reference no: EM132622134

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