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

question 65

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:
$\begin{array}{ll} \text {Net Cash Flow}& \text {Net Income}& \text { Year}\\\$ 200,000 & \$ 45,000 &1\\240,000 & 85,000 &2\\160,000 & 5,000&3 \\170,000 & 15,000 &4\\ 770,000 & \$ 150,000\end{array}$
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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Definitions:

Humanistic Therapy

A form of psychotherapy that emphasizes personal growth and the achievement of maximum potential by focusing on the individual's unique self and subjective experience.

Psychological Problems

Mental or behavioral patterns that can cause significant distress or impairment in personal functioning.

Optimal Level

The most favorable or advantageous degree of intensity or concentration for a specific function or activity.

Transference

A phenomenon in psychoanalysis where patients project feelings, attitudes, or desires onto their therapist, confusing the therapist with figures from their past.