a. Determine the average rate of return for a project that is estimated to yield total income of $419,900 over five years, has a cost of $769,100, and has a $114,900 residual value. Round to the nearest whole number.

%

b.

Net Present Value

A project has estimated annual net cash flows of $8,750 for three years and is estimated to cost $50,000. Assume a minimum acceptable rate of return of 15%. Use the **Present Value of an Annuity of $1 at Compound Interest** table below.

Present Value of an Annuity of $1 at Compound Interest |
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Year |
6% |
10% |
12% |
15% |
20% |

1 | 0.943 | 0.909 | 0.893 | 0.870 | 0.833 |

2 | 1.833 | 1.736 | 1.690 | 1.626 | 1.528 |

3 | 2.673 | 2.487 | 2.402 | 2.283 | 2.106 |

4 | 3.465 | 3.170 | 3.037 | 2.855 | 2.589 |

5 | 4.212 | 3.791 | 3.605 | 3.353 | 2.991 |

6 | 4.917 | 4.355 | 4.111 | 3.785 | 3.326 |

7 | 5.582 | 4.868 | 4.564 | 4.160 | 3.605 |

8 | 6.210 | 5.335 | 4.968 | 4.487 | 3.837 |

9 | 6.802 | 5.759 | 5.328 | 4.772 | 4.031 |

10 | 7.360 | 6.145 | 5.650 | 5.019 | 4.192 |

Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value.

Net present value of the project (round to the nearest dollar) |
$ |

Present value index (rounded to two decimal places) |