67)

Average Rate of Return Method, Net Present Value Method, and Analysis The capital investment committee of the Transport and Storage Inc. is considering two investment projects. The estimated income from operations and net cash flows trom each investment are as follows: Warehouse Tracking Technology Income from Net Cash Income from Year Net Cash Operations Flow Operations Flow 1 552.500 $162,000 $110,000 $259,000 2 32.500 169,000 $4,000 219,000 3 32.500 162,000 42,000 154,000 2.500 162,000 18,000 105,000 5 $2.500 167,000 1,500 73,000 262.500 3510,000 $262,500 $310,000 tas cores investment of 1500,000. Straight-line depreciation will be used, and no residual values expected. The committee has selected a rate of 10% for street value analysis Present Value of 51 at Compound Interest 104 12 204 090 0893 0.756 0.6.94 0.070 2 0.792 0.75 0.712 0.72 . 0.572 0579 0.42 0.402 5 0.56% 0.497 705 0335 0. 0.513 9.45 0.376 2 0.890 0.826 0.797 0.694 0.756 3 0.579 0.658 0.840 0.751 0.712 0.636 4 0.792 0.683 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 0.194 0.284 0.247 10 0.550 0:386 0.322 0.162 Required: is. Compute the average rate of return for each investment. If required, round your answer to one decimal place. Average Rate of Return Warehouse % Tracking Technology % 1. 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 Warehouse Present value of net cash flow total Tracking Technology amount to be invested 2. The warehouse has can become the present vale as tracking technology cash flows occur would be the more attractive in time. Thus, If only one of the two