Average rate of return, cash payback period, net present value method for a service company The St. Louis to Seattle Railroad is considering acquiring equipment at a cost of $180,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly 'net cash flows of $45,000. The company's minimum desired rate of return for net present value analysis is 15%. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.870 0.833 1.626 1.528 1 2 3 4 5 6

Average rate of return, cash payback period, net present value method for a service company The St. Louis to Seattie Railroad is considering acquiring equipment at a cost of $180,000. The equipment has an estimated ife of 10 years and no residual value. It is expected to provide yearly'net cash flows of $45,000. The company's minimum desired rate of return for net present value analysis is 15%. Present Valua of an Compute the following: a. The average rate of return, giving effect to straight-line depreciation on the investment. If required, round your answer to one decimal place. x% b. The cash payback period. c. The net present value, Use the above table of the prosent value of an annuity of \$1. Round to the nearest dollar, If required, use a minus sign ta indicate negative net present value for current grading purpose. Average rate of return, cash payback period, net present value method for a service company The St. Louis to Seattie Railroad is considering acquiring equipment at a cost of $180,000. The equipment has an estimated ife of 10 years and no residual value. It is expected to provide yearly 'net cash nows of $45,000. The company's minimum desired rate of return for net present value analysis is 15%. Compute the following: a. The average rate of return, giving effect to straight-line depreciation on the investment. If required, round your answer to one decimal place. x% b. The cash payback period. 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. Compute the following: a. The average rate of return, giving effect to straight-line' depreciation on the investment. If required, round your answer to one decimal place. x% b. The cash payback period. 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. Feodoack reneck My Work a. Divide the estimated average annual income by the average investment. Net cosh fow 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 15%, refer Exhibit 5 in the text.)