Average Rate of Return, Cash Payback Period, Net Present Value Method Bi-Coastal Railroad Inc. is considering acquiring equipment at a cost of $65,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $33,000. The company's minimum desired rate of return for net present value analysis is 12% Present Value of an Annuity of $1 at Compound Interest Year 6% 0.943 1.833 12% 0.893 1.736 .690 .626 2.673 2.487 2.402 2.283 2.106 3.465 3.170 3.037 2.855 2.589 4.212 3.791 3.6053.353 2.991 10% 15% 20% 0.833 1.528 0.909 0.870 4.917 4.355 3.785 3.326 4.868 4.564 4.160 6.210 5.335 4.968 4.4873.837 6.802 5.759 5.328 4.7724.031 7.360 6.145 5,6505.019 4.192 5.582 3.605 10 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. Prescnt value of annual net cash flows Less amount to be invested Net present value The following data are accumulated by Paxton Company in evaluating the purchase o $159,900 of equipment, having a four-year useful life Net Income Net Cash Flow Year 1 Year 2 Year 3 Year 4 $34,000 21,000 10,000 (1,000) $58,000 45,000 34,000 23,000 Present Value of $1 at Compound Interest 6% 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 Year 1290 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.4040.327 0.361 0.322 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 0.284 10 0.247 a. Assuming that the desired rate of return is 6%, determine the net present value for the proposal. Use the table of the present value of $1 presented above. If required round to the nearest dollar. If required, use the minus sign to indicate a negative net present value. Present value of net cash flow