Determine and show the net present value

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Reference no: EM131691226

BAM Co. is evaluating a project requiring a capital expenditure of $806,250. The project has an estimated life of 4 years and no salvage value. The net cash flow from the project is as follows:

Year Net Cash Flow

1 $285,000

2 290,000

3 190,000

4 125,000

$890,000

?The company's minimum desired rate of return is 12%.

Determine the average rate of return on the investment.

Use the formula that you were given in class to determine the present value factor of $1.00 at 12% for each of the 4 years. SHOW THE FORMULA AND PLACE THESE NUMBERS IN A CHART.

Determine and show the net present value for the 4 years, adding these numbers to the previously created chart.

Should the BAM CEO do this deal? Why/why not?

Reference no: EM131691226

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