Vanessa Company Is Evaluating a Project Requiring a Capital Expenditure

Vanessa Company is evaluating a project requiring a capital expenditure of $480,000. The project has an estimated life of 4 years and no salvage value. The estimated net income and net cash flow from the project are as follows: $$\begin{array} { c l l } \text { Year } & \text { Net Income } & \text { Net Cash Flow } \\1 & \$ 90,000 & \$ 210,000 \\2 & 80,000 & 200,000 \\3 & 40,000 & 160,000 \\4 & 30,000 & 150,000 \\& \$ 240,000 & \$ 720,000\end{array}$$ The company's minimum desired rate of return for net present value analysis is 15%. The present value of $1 at compound interest of 15% for 1, 2, 3, and 4 years is 0.870, 0.756, 0.658, and 0.572, respectively.
Determine a) the average rate of return on investment, using straight-line depreciation, and b) the net present value.

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a)$240,000/4 = $60,0...

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