Avenge Rate of Return Method, Net Present Value Method, and Analysis The capital investment committee of Ells 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 Income from Net Cash Income from Net Cash Year Operations Flow Operations Flow 1 $52.000 5158,000 $109,000 5253,000 52,000 158,000 83,000 213,000 52.000 158,000 42,000 150,000 52,000 158,000 18,000 103,000 52.000 450,000 8,000 71,000 Total $260,000 5790,000 $260,000 $790,000 5 Each project requires an investment of $520,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15 for purposes of the net present value analysis, Present Value of $1 at Compound Interest Year 5% 20% 104 12% 15% 0.943 0.909 0.893 0.870 0.756 0.833 0.694 0.025 0.797 0.89 0.540 0.755 0.712 0.689 0.579 eAssignmentake Assignment Main.do?invoker &takeAssignmentSessionLocator=&inprogress-false Ench project requires an investment of $520,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for purposes of the net present value analysis. Present Value of $1 at Compound Interest 12% 20% Year 6% 10% 15% 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 0.432 0.335 7 0.665 0.513 0.507 0.952 0.404 0.376 0.279 B 0.627 0.467 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: in. Compute the average rate of return for each investment Average Rate of Return Warehouse Tracking Technology 1b. Compute the net present value for each investment. Use the present Value of $1 table above. If required, use the minut sign to skedesignment/takeAssignmentMain.do?invoker-StakeAssignmentSessionLocator=&inprogress=false 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Required: 1a. Compute the average rate of return for each investment Average Rate of Return Warehouse 96 9 Tracking Technology 1b. Compute the net present value for each Investment. Use the present value of si 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 Less amount to be invested Net present value 2. The warehouse has a net present value as tracking technology cash flows occur Thus, If only one of the two projects can be accepted, the would be the more attractive in time
