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 Fixtures Income from Operations $25,000 20,000 7,000 3,000 1,250 $56,250 Income from Operations $11,250 11,250 11,250 11,250 11,250 $56,250 Net Cash Net Cash Year Flow Flow 40,000 35,000 22,000 18,000 16,250 $131,250 s 26,250 26,250 26,250 26,250 26,250 $131,250 Each project requires an investment of $75,000. 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 20% 0.870 0.833 0.797 0.756 0.694 Year 6% 0.943 0.890 0.826 0.840 0.75 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335 0.665 0.513 0.452 0.376 0.279 0.627 0.467 0.404 0.327 0.233 0.592 0.424 0.361 0.284 0.194 0.558 0.386 0.322 0.247 0.162 10% 12% 15% 0.909 0.893 10