Average Rate 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 Income from operations and net cash flows from each investment are as follows: Front-End Loader Greenhouse Income from Operations $39,900 Net Cash Flow Year Income from Operations $84,000 Net Cash Flow 1 $127,000 $203,000 2 39,900 127,000 64,000 171,000 3 39,900 121,000 127,000 127,000 32,000 14,000 39,900 83,000 5 39.900 127,000 5,500 57,000 Total $199,500 $635,000 $199,500 $635,000 Each project requires an Investment of $420,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis. Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% Year 1 0.943 0.909 0.893 0.870 0.833 2 0.290 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.402 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 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 Front-End Loader % Greenhouse % 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. Front-End Loader Greenhouse Present value of net cash flow $ $ 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 present 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