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im confused why are they dividing initial investment by 2? why are they averaging income instead of net cash flow? The management of Indiana Corporation

im confused why are they dividing initial investment by 2?

why are they averaging income instead of net cash flow?

The management of Indiana Corporation is considering the purchase of a new machine costing $400,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability of this investment:

Year

Income from Operations

Net Cash

Flow

1

$100,000

$180,000

2

60,000

120,000

3

30,000

100,000

4

10,000

90,000

5

10,000

90,000

The average rate of return for this investment is

18%

21%

53%

10%

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