1. Average Rate of Return, Cash Payback Period, Net Present Value Method

   Bi-Coastal Railroad Inc. is considering acquiring equipment at a cost of $376,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $47,000. The companys minimum desired rate of return for net present value analysis is 12%.

   Present Value of an Annuity of $1 at Compound Interest
   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

   Compute the following:

   a. The average rate of return, assuming the annual earnings are equal to the net cash flows less the annual depreciation expense on the equipment. If required, round your answer to one decimal place. _______?________ %

   b. The cash payback period. ____?_______ years

   c. The net present value. Use the above table of the present value of an annuity of $1. Round to the nearest dollar. If required, use a minus sign to indicate negative net present value" for current grading purpose.

   Present value of annual net cash flows	$fill in the blank 3
   Less amount to be invested	$fill in the blank 4
   Net present value	$fill in the blank 5