Average 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 $34,200 $107.000 $72,000 $171,000 34,200 107,000 55,000 144,000 3 34,200 107,000 27,000 102,000 4 34,200 107.000 12,000 70,000 34,200 107,000 5,000 48,000 Total $171,000 $535,000 $171,000 $535,000 1 2 5 Each project requires an investment of $360,000. 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 10% 20% 0.909 0.893 0.870 Year 12% 15% 1 0.943 0.833 2 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579