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 Year Income from Operations Net Cash Flow Income from Operations Net Cash Flow $40,000 40,000 40,000 40,000 40,000 $200,000 $128,000 128,000 128,000 128,000 128,000 $640,000 $84,000 64,000 32,000 14,000 6,000 $200,000 $205,000 173,000 122,000 83,000 57,000 Total $640,000 Each project requires an investment of $400,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.9090.893 0.870 0.833 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.821 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 0.233 9 0 .592 0.424 0.361 0.284 0.194 10 0 .558 0.386 0.322 0.247 0.162 0.327 Required: la. Compute the average rate of return for each investment. If required, round your answer to one decimal place. Warehouse Average Rate of Return 50 X % 50 X % 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 Present value of net cash flow total $ 485,120 $400,000 Tracking Technology $512,951 $ 400,000 Less amount to be invested Net present value $ 85,120 $ 112,951 in time. Thus, if only one of the two projects 2. The warehouse has a larger X net present value as tracking technology cash flows occur earlier can be accepted, the tracking technology would be the more attractive