Average Rate of Return Method, Net Present Value Method, and Analysis 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 Income from Year Operations Net Cash Flow Income from Net Cash Operations Flow 1 $55,100 $168,000 $116,000 $209,000 2 55,100 168,000 88,000 227,000 3 55,100 168,000 44,000 160,000 4 55,100 168,000 19,000 109,000 5 55,100 Total $275,500 168,000 $840,000 8,500 $275,500 75,000 $840,000 Each project requires an investment of $580,000. Straight-line deprecation 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 0.043 0.000 0.803 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 9 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.577 0.482 5 0.747 0.621 0.567 0.407 0.402 6 0.705 0.501 0.507 0.132 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 5 0.592 0.424 0.361 0.284 0.154 10 0.558 0.386 0.322 0.247 0.162 Required: 1a. Compute the average rate of return for each investment. Warehouse Tracking Technology Average Rate of Return % 5 1b. 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 Less amount to be invested Net present value $ 2. The warehouse has a smaller net present value as tracking technology cash flows occur earlier in time. Thus, if only one of the two projects can be accepted, the tracking technology would be the more attractive. Check My Work All work saved. Previous Serve and Exit Submit Assignment for Gradin