Question

# 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.

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

%

**b. **Determine the net present value.

$

Sommers Company is evaluating a project requiring a capital expenditure of $300,000. The project has an estimated life of 5 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 $60,000 $120,000

2 50,000 110,000

3 45,000 105,000

4 30,000 90,000

5 20,000 80,000

$205,000 $505,000

The company's minimum desired rate of return for net present value analysis is 12%. The present value of $1 at compound interest of 12% is shown in the table below:

Year Present Value of $1 at 12%

1 0.893

2 0.797

3 0.712

4 0.636

5 0.567

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

%

**b. **Determine the net present value.

$

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Q.1 Accounting Rate of Return 6.05% Net... View the full answer