1. 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
   Year	Income from Operations		Net Cash Flow			Income from Operations		Net Cash Flow
   1	$52,500		$167,000			$110,000		$267,000
   2	52,500		167,000			84,000		225,000
   3	52,500		167,000			42,000		159,000
   4	52,500		167,000			18,000		109,000
   5	52,500		167,000			8,500		75,000
   Total	$262,500		$835,000			$262,500		$835,000

   Each project requires an investment of $500,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 12% for purposes of the net present value analysis.

   Present Value of $1 at Compound Interest
   Year	6%	10%	12%	15%	20%
   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	0.507	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	0.284	0.194
   10	0.558	0.386	0.322	0.247	0.162

   Required:

   1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place.

   	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 minus sign to indicate a negative net present value.

   	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 warehouse would be the more attractive.