Average Rate of Return Method, Net Present Value Method, and Analysis the capital investment committee of Safety
Question:
Average Rate of Return Method, Net Present Value Method, and Analysis the capital investment committee of Safety Haul Trucking Inc. is considering two investment projects. The estimated income from operations and net cash flows from each investment are as follows:
Each project requires an investment of $400,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for purposes of the Net Present Value analysis.
a. Compute the average rate of return for investment. If required, round your answer to one decimal place._______________%
b. Compute the Net Present Value for each investment. Use the present value of $1 table present value. If required, use the minus sign to indicate a negative Net Present Value. If required, round to the nearestdollar.
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...
Step by Step Answer:
Accounting
ISBN: 978-0324188004
21st Edition
Authors: Carl s. warren, James m. reeve, Philip e. fess