PLEASE HELP urgent The division is evaluating a project requiring a capital cost of $254,000. 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: look at screenshot* 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. 1. Determine the average rate of return on investment 2. Determine the Net Present Value

1. Average rate of return on investment = 12.11%

2. Net Present Value =  – $14,845.09

Explanation:

1. Determine the average rate of return on investment

Average rate of return on investment is the total net incomes from an investment divided the estimated life of the investment, and this is then divided by the cost of acquisition of the investment. This can be calculated for this question as follows:

Average income = Total net income / Estimated life = 123,000 / 4 = $30,750

Average rate of return on investment = Average income / Acquisition cost = $30,750 / $254,000 = 0.1211, or 12.11%

2. Determine the Net Present Value

Net present value is the difference between the present value of the acquisition of an investment and sum of the present values of all the net flows from the investment over its useful life.

Note: See the attached excel file to see how the net present value (NPV) is calculated.

Net Present Value =  – $14,845.09

Conclusion

Since the Net Present Value is negative, it therefore implies the project is not a good investment.

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