1. The KK Business is considering two capital asset investment projects. Project 1 is requires a capital expenditure of $1,125,000. The project has an estimated useful life of five years and no salvage value. The estimated net cash flows and net Income from the first project are as follows:

The company's minimum desired rate of return is 14%. The present value of $1 at compound interest of 14% for 1, 2, 3, 4 and 5 years is .877, 769, 675, 592 and 519, respectively. Determine: (a) the average rate of return on investment, including the effect of depreciation on the investment, and (b) the net present value.