Average rate of return method, net present value method, and analysis for a service company Required:

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

Average Rate of Return

value.

Prepare a brief report for the capital investment committee, advising it on the relative merits of the two investments.

The robotic assembler has a

net present value because cash flows occur

$n$ time compared to the warehouse. Thus, if only one of the two projects can be accepted, the

; would be the more attractive.

The capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows:

$\backslash$table$[[$Year$,\backslash$table$[[$Robotic Assembler$],[$Operating Income$]],\backslash$table$[[$Robotic Assembler$],[$Net Cash Flow$]],\backslash$table$[[$Operating$],[$Income$]],\backslash$table$[[$Warehouse$],[$Net Cash Flow$]]],[1,$$$55,000,$$$175,000,$$$116,000,$$$280,000],[2,55,000,175,000,88,000,236,000],[3,55,000,175,000,44,000,166,000],[4,55,000,175,000,19,000,114,000],[5,55,000,175,000,8,000,79,000],[$Total$,$$$275,000,$$$875,000,$$$275,000,$$$875,000]]$

Present Value of $$1$ at Compound Interest

$\backslash$table$[[$Year$,6\%,10\%,12\%,15\%,20\%],[1,0\mathrm{.}943,0\mathrm{.}909,0\mathrm{.}893,0\mathrm{.}870,0\mathrm{.}833],[2,0\mathrm{.}890,0\mathrm{.}826,0\mathrm{.}797,0\mathrm{.}756,0\mathrm{.}694],[3,0\mathrm{.}840,0\mathrm{.}751,0\mathrm{.}712,0\mathrm{.}658,0\mathrm{.}579],[4,0\mathrm{.}792,0\mathrm{.}683,0\mathrm{.}636,0\mathrm{.}572,0\mathrm{.}482],[5,0\mathrm{.}747,0\mathrm{.}621,0\mathrm{.}567,0\mathrm{.}497,0\mathrm{.}402],[6,0\mathrm{.}705,0\mathrm{.}564,0\mathrm{.}507,0\mathrm{.}432,0\mathrm{.}335],[7,0\mathrm{.}665,0\mathrm{.}513,0\mathrm{.}452,0\mathrm{.}376,0\mathrm{.}279],[8,0\mathrm{.}627,0\mathrm{.}467,0\mathrm{.}404,0\mathrm{.}327,0\mathrm{.}233],[9,0\mathrm{.}592,0\mathrm{.}424,0\mathrm{.}361,0\mathrm{.}284,0\mathrm{.}194],[10,0\mathrm{.}558,0\mathrm{.}386,0\mathrm{.}322,0\mathrm{.}247,0\mathrm{.}162]]$