1. The capital investment committee of Ellis Transport and Storage Inc. is considering two investment projects. The estimated income from operations and net cash flows from each investment are as follows:

	Warehouse					Tracking Technology
Year	Income from Operations		Net Cash Flow			Income from Operations		Net Cash Flow
1	$50,400		$162,000			$106,000		$259,000
2	50,400		162,000			81,000		219,000
3	50,400		162,000			40,000		154,000
4	50,400		162,000			18,000		105,000
5	50,400		162,000			7,000		73,000
Total	$252,000		$810,000			$252,000		$810,000

Each project requires an investment of $560,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 12% for purposes of the net present value analysis.

Present Value of $1 at Compound Interest
Year	6%	10%	12%	15%	20%
1	0.943	0.909	0.893	0.870	0.833
2	0.890	0.826	0.797	0.756	0.694
3	0.840	0.751	0.712	0.658	0.579
4	0.792	0.683	0.636	0.572	0.482
5	0.747	0.621	0.567	0.497	0.402
6	0.705	0.564	0.507	0.432	0.335
7	0.665	0.513	0.452	0.376	0.279
8	0.627	0.467	0.404	0.327	0.233
9	0.592	0.424	0.361	0.284	0.194
10	0.558	0.386	0.322	0.247	0.162

Required:

a. Compute the average rate of return for each investment.

	Average Rate of Return
Warehouse	fill in the blank 1%
Tracking Technology	fill in the blank 2%

b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest dollar.

	Warehouse	Tracking Technology
Present value of net cash flow total	$fill in the blank 3	$fill in the blank 4
Less amount to be invested	$fill in the blank 5	$fill in the blank 6
Net present value	$fill in the blank 7	$fill in the blank 8

c. The warehouse has a

larger smaller

net present value as tracking technology cash flows occur

earliermore evenlylater

in time. Thus, if only one of the two projects can be accepted, the

tracking technologywarehouse

would be the more attractive.