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 Net Cash Income from Operations Net Cash Flow Year Income from Operations $100,000 Flow 1 $47,500 $152,000 $243,000 2 47,500 205,000 152,000 152,000 76,000 38,000 3 47,500 144,000 4 47,500 152,000 17,000 99,000 69,000 5 47,500 6,500 152,000 $760,000 Total $ 237,500 $ 237,500 $760,000 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 15% for purposes of the net present value analysis. Year 1 1 Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 2 3 4 0.792 0.683 0.636 0.572 0.482 0.402 5 0.747 0.621 0.567 0.497 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 19 % Front-End Loader Greenhouse 19 % 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 500,000 500,000 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 smaller net present value because cash flows occur later in time compared to the greenhouse. Thus, if only one of the two projects can be accepted, the greenhouse would be the more attractive