Williams Company is evaluating a project requiring a capital expenditure of $480,000. The project has an estimated life of 4 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 $ 90,000 $ 210,000
2 80,000 200, 000
3 40,000 160,000
4 30,000 150,000
Total 240,000 720,000
The company's minimum desired rate of return for net present value analysis is 15%. The present value of $1 at compound interest of 15% for 1,2,3, and 4 years is .870, .756, .658, and .572, respectively.
Determine (a) the average rate of return on investment, giving effect to depreciation on the investments, and (b) the net present value