June CoIs Evaluating a Project Requiring a Capital Expenditure of $620,000

question 60

Essay

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:
? $\begin{array}{rrr}\text { Year }&\text {Net Income}&\text { Net Cash Flow }\\1 & \$ 45,000 & \$ 200,000 \\2 & 85,000 & 240,000 \\3 & 5,000 & 160,000 \\4 & 15,000 & 170,000 \\& \$ 150,000 & \$ 770,000\end{array}$ ?
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.
Determine: (a) the average rate of return on investment, giving effect to depreciation on the investment, and (b) the net present value.

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Independent Agency

An agency that is typically not located within a government department. It is governed by a board of commissioners appointed by the president with the advice and consent of the Senate.

Accounting Commission

An accounting commission refers to a governing body or group of experts that oversees accounting standards and practices, ensuring integrity and compliance within the profession.

Informal Rule Making

A process by which regulatory agencies create and issue rules through a less formal process than formal rulemaking, often involving public notice and comment.

Formal Rule Making

A process by which federal agencies create new regulations, involving publication of a proposed rule, a period for public comment, and the issuance of a final rule.