The capital investment committee of Transport and Storage Inc. is considering an investment project. The estimated income from operations and net cash flows from the investment is as follows:

WAREHOUSE

YEAR INCOME FROM OPERATIONS NET CASH FLOWS

1 $ 61,400 $135,000

2 51,400 125,000

3 36,400 110,000

4 26,400 100,000

5 3,600 70,000

TOTAL $179,200 $540,000

The project requires an investment of $368,000. Straight-line depreciation will be used, and a residual value of $18,000 is expected. The committee has selected a rate of 12% for purposes of the net present value analysis.

Instructions

Compute the following:

1. The Cash Payback Period

2. Average Rate of Return (Round to one decimal place)

3. Net Present Value (Round present values to the nearest dollar)

4. Present Value Index