Vanessa Company is evaluating two projects. project 1 is a project requiring a capital expenditure of 814,400. 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 90,000 210,000
2 80,000 200,000
3 40,000 160,000
4 30,000 150,000
5 240,000 720,000
Companys minimum desired rate or returen 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 0.870 0.756 0.658 and 0.572. Determine the average rate of return on investment using straight line method and net present value.
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