BAM Co Is Evaluating a Project Requiring a Capital Expenditure of of $806,250

question 119

Essay

BAM Co. is evaluating a project requiring a capital expenditure of $806,250. The project has an estimated life of 4 years and no salvage value. The estimated net income and net cash flow from the project are as follows: The company's minimum desired rate of return is 12%. The factors for the present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years are 0.893, 0.797, 0.712, and 0.636, respectively.Determine (a) the average rate of return on investment and (b) the net present value.

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Definitions:

Political Incentive

A reason or motivation based on political goals or outcomes, influencing the actions of politicians or governments.

New Deal

A series of programs, public work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in the United States during the 1930s to help recover from the Great Depression.

Great Depression

A severe worldwide economic depression that took place mostly during the 1930s, beginning in the United States.

Economic Policy

Economic policy refers to the actions that governments take in the economic field covering taxation, government budgets, money supply, interest rates, and labor market regulations.