2. smaller/larger, earlier/later and front-end loader/greenhouse.

Average Hate 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: 1 2 3 Front-End Loader Operating Net Cast Income Flow 158,200 $220,000 1.200 220,000 8.200 220,000 60,700 220,000 61,200 220,000 $1,000 31,100,000 Greenhouse Operating Net Cash Income Flow $143.000 $352,000 109,000 297,000 55,000 209.000 24,000 143,000 10,000 09,000 $341,000 $1,100,000 4 5 Total tach project comes in west of $420,000. Straight line depreciation will be used, and no residual value is expected. The committee has selected a rate of 12 for purposes of the nel present value analysis Present Value of Stat Compound interest Year 10% 129 20% 0.93 0.900 0.89 0.870 0.000 0197 0.694 3 0.340 0.712 0.656 0.192 0.636 0.572 0.462 1 BU 2 0.756 0.751 0.579 4 0.663 5 0.747 0.621 0.567 6 0.705 0.507 2 0.402 0.335 0.279 0.233 0.564 0.513 0.467 0.665 0.497 0,432 0.376 0.322 0.254 0.452 0.404 0.627 0.592 9 0.424 0.161 0.194 0.162 10 0.558 0.386 0.322 0.247 Requiredit Ia. 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 52.4 X Greenhouse 55 X 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 minussion to indicate a negative present value Front End Loader Greenhouse Present Value of net cash flow 196,460 X Amount to be invested Net present value 2. Prepare a brief report for the capital investment committee, advising it on the relative merits of the two investments The front-end loader has a net precent 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 more attractive Newt