Average Rate of Return, Cash Payback Period, Net Present Value Method Bi-Coastal Railroad Inc. is considering acquiring equipment at a cost of $275,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $55,000. The company's minimum desired rate of return for net present value analysis is 10%. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 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: 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 Less amount to be invested $ Net present value Average Rate of Return-Cost Savings an average wage of $32,400 per year. In Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $99,000 with a $9,000 residual value and a five-year life. The equipment will replace one employee who addition, the equipment will have operating and energy costs of $9,540 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent. %