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:

Year Net Income Net Cash Flow

1 $60,000 $120,000

2 50,000 110,000

3 45,000 105,000

4 30,000 90,000

5 20,000 80,000

$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:

Year Present Value of $1 at 12%

1 0.893

2 0.797

3 0.712

4 0.636

5 0.567

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.

$