Question
Average Rate of Return, Cash Payback Period, Net Present Value Method Great Plains Railroad Inc. is considering acquiring equipment at a cost of $450,000. The
Great Plains Railroad Inc. is considering acquiring equipment at a cost of $450,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $75,000. The company's minimum desired rate of return for net present value analysis is 10%.
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. % b. The net present value. Use the above table of the present value of an annuity of $1. Round to the nearest dollar.
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