$106.000 Average Rate of Return Method, Net Present Value Method, and Analysis for a service company The capital Investment committee of Arches Landscaping Company is considering two capital Investments. The estimated operating Income and net cash flows from each investment are as follows: Front-End Loader Greenhouse Operating Net Cash Flow Net Cash Flow Year Income 1 2 Operating Income $50.400 0 50,400 50,400 50,400 50,400 $251,000 212,000 149,000 3 $157,000 157,000 157,000 157,000 157,000 $785,000 81,000 40,000 19,000 7,000 4 102,000 71,000 5 Tatal $252,000 $252,000 $785,000 Each project requires an investment of $480,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis. Present Value of $1 at Compound Interest Year 6% 6% 10% 12%. 15% 20% 1 0.943 0.909 0.993 0.870 0.833 2 0.890 0.825 0.797 0.756 0.694 3 0.940 0.712 0.658 0.579 0.751 0.683 0.792 0.635 0.572 0.482 0.402 5 0.747 0.621 0,567 0.497 0.432 6 0.705 0.564 0.507 0.335 7 0.665 0.376 0.279 0.513 0.467 0.452 0.104 8 0.627 0.327 0.233 9 9 0.592 0.424 0.264 0.194 0.361 0.322 10 0.558 0.386 0.247 0.162 Required: 1a. Compute the average rate of return for each Investment. If required, round your answer to one decimal place. Average Rate of Return Front-End Loader Greenhouse Check My Work 3 more Check My Work uses romaning. Next > 5 7,000 71,000 50,400 $252.000 157,000 $785,000 Total $252,000 $785,000 Each project requires an investment or $480,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis. Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% Year 1 0.943 0.870 2 0.890 0.893 0.797 0.137 0.712 0.756 3 0.656 4 0.909 0.020 0.826 0.751 0.683 0.621 w 0.561 . 0.513 0.833 0.694 0.579 0.482 0.104 0.402 Wala 0.335 0.340 0.00 0.792 W.14 0.747 0.705 0.66 W. 0.6GS 0.627 0.572 5 0.636 wa 0.567 we 0.507 0.497 0.432 6 7 0.452 18 0.404 0.376 32 0.279 0.233 8 0.467 9 0.592 0.424 0.284 0.194 0.361 0.322 10 0.558 0.386 0.247 0.162 Required: 1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place. . Average Rate of Return Front-End Laader Greenhouse 1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, round to the nearest dollar. If required, use the minus sign to indicate a negative not present value. Front-End Loader Greenhouse Present value of net cash flow $ Amount to be invested Net present value s $ Prepare a brief report for the capital investment committee, advising it on the relative merits of the two investments. net present value because cash flows occur in time compared to the greenhouse. Thus, if only one of the two projects can be accepted, the would be the The front-end loader has a more attractive Check My Work more Check My Work uses romaning. Next >