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 cash flow from the project are as follows.
year net income Net cash flow
1 90,000 210,000
2 80,000 200,000
3 40,000 160,000
4 30,000 150,000
240,000 720,000
Company's minimum desired rate of return for net present value analysis is 15 %. The present value of the $1 at compound intrest of 15% for 1,2,3,4 years is. 870.756.658 and. 572 determine the average rate of return on investment using straight line method and net present value.
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