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 operating income and net cash flows from each investment are as follows: Front-End Loader Greenhouse Operating Income Net Cash Flow Operating Income Net Cash Flow Year $49,400 $153,000 $104,000 $245,000 49,400 153,000 79,000 207,000 49,400 40,000 145,000 153,000 153,000 49,400 17,000 99,000 49,400 153,000 7,000 69,000 Total $247,000 $765,000 $247,000 $765,000 Each project requires an investment of $520,000. 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. Year 1 2 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 0.792 0.683 0.636 0.572 0.482