June Co.is evaluating a project requiring a capital expenditure of $619,200.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:
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 .893,.797,.712,and .636,respectively.
Determine: (a)the average rate of return on investment,giving effect to depreciation on the investment,and (b)the net present value.
Definitions:
Current Liabilities
Debts or obligations that a company is expected to pay within one year, including accounts payable, short-term loans, and accrued expenses.
Accounts Payable
Liabilities of a business that are due to suppliers for goods and services bought on credit, to be paid off within a short period.
Financial Statement Analysis
This is the process of reviewing and evaluating a company's financial statements to make business decisions.
Balance Sheet
A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time.
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