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 Net Cash Income from Net Cash Operations Flow Operations Flow $34,200 $107.000 $72,000 $171,000 2 34,200 107,000 55,000 144,000 34,200 107,000 27,000 102,000 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 3 4 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 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 0.579 3 0.840 0.751 0.712 0.658 Year 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 1 2 3 0.840 0.751 0.658 0.579 0.712 0.636 4 0.792 0.683 0.572 0.482 5 0.747 0.621 0.497 0.402 0.567 0.507 6 0.705 0.564 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 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 96 Required: ia. 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 niet present value as tracking technology cash flows occur in time. Thus, if only one of the two projects can be accepted, the would be the more attractive