CJN Corporation is evaluating a project requiring a capital expenditure of $806,250. The project has an estimated life of four years with no residual value at the end of the four years. The estimated net income and net cash flow from the project are as follows: Year Net Income Net Cash Flow 1 $ 75,000 $285,000 2 102,000 290,000 3 109,500 190,000 4 36,000 125,000 $322,500 $890,000 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, and (b) the net present value.
CJN Corporation is evaluating a project requiring a capital expenditure of $806,250. The project has an estimated life of four years with no residual value at the end of the four years. The estimated net income and net cash flow from the project are as follows: Year Net Income Net Cash Flow 1 $ 75,000 $285,000 2 102,000 290,000 3 109,500 190,000 4 36,000 125,000 $322,500 $890,000 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, and (b) the net present value.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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- CJN Corporation is evaluating a project requiring a capital expenditure of $806,250. The project has an estimated life of four years with no residual value at the end of the four years. The estimated net income and net cash flow from the project are as follows:
|
Year |
Net Income |
Net Cash Flow |
|
1 |
$ 75,000 |
$285,000 |
|
2 |
102,000 |
290,000 |
|
3 |
109,500 |
190,000 |
|
4 |
36,000 |
125,000 |
|
|
$322,500 |
$890,000 |
The company's minimum desired
Determine: (a) the average rate of return on investment, and (b) the
|
(a) |
|
|
(b) |
|
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