Sommers Company is evaluating a project requiring a capital expenditure of $300,000. The project has an estimated life of 5 years and no salvage value. The estimated net income and net cash flow from the project are as follows:

YearNet IncomeNet Cash Flow1$60,000$120,000250,000110,000345,000105,000430,00090,000520,00080,000$205,000$505,000

The company's minimum desired rate of return for net present value analysis is 12%. The present value of $1 at compound interest of 12% is shown in the table below:

YearPresent Value of $1 at 12%10.89320.79730.71240.63650.567

a.Determine the average rate of return on investment, giving effect to depreciation on the investment. Round your answer to two decimal places.

%

b.Determine the net present value.

$