Average Rate of Return, Cash Payback Period, Net Present Value Method for a Service Company Spanish Peaks Raliroad Inc. is considering acquiring equipment at a cost of $284,000. The equipment has an estimated life of 10 years and no residual value It is expected to provide yearly net cash flows of $71,000. The company's minimum desired rate of retum for net present value analysis is 10%. Compute the following: a. The average rate of retum, giving effect to straight-line depreciation on the investment. If required, round your answer to one decimal place. b. The cash payback period. r c. The net present value. Use the above table of the present value of an annuity of \$1. Round to the nearest doliar. If required, use a minus sign to indicate negative net present value for current grading purpase. F Check My work a. Divide the estimated average annual inceme by the average imvestment. Net cash fiow less the annual depreciation expense equals average annual income. Investment cost divided by two equals average investment. b. Divide the amount to be invested by the annual net cash inflow. c. Subtract the cost from the present value of the annual net cash flow. (Use the present value of an annuity factor for 10 periods at 103 , refer Exhibit 5 in the text.)