Average Rate of Return Method, Net Present Value Method, and Analysis The capital investment committee of...

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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 Operations Net Cash Flow Income from Net Cash Operations Flow 1 $52,000 $170,000 $109,000 $272,000 2 52,000 170,000 83,000 230,000 3 52,000 170,000 42,000 162,000 4 52,000 170,000 18,000 111,000 $2,000 170,000 8,000 75,000 Total $260,000 $850,000 $260,000 $850,000 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 15% 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 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 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. Warehouse Tracking Technology th Compute the n Average Rate of Return) % % able above if mulcedinens L 1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign t indicate a negative net present value. If required, round to the nearest dollar. Present value of net cash flow total Less amount to be invested Net present value 2. The warehouse has a Warehouse Tracking Technology net 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. 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 Operations Net Cash Flow Income from Net Cash Operations Flow 1 $52,000 $170,000 $109,000 $272,000 2 52,000 170,000 83,000 230,000 3 52,000 170,000 42,000 162,000 4 52,000 170,000 18,000 111,000 $2,000 170,000 8,000 75,000 Total $260,000 $850,000 $260,000 $850,000 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 15% 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 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 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. Warehouse Tracking Technology th Compute the n Average Rate of Return) % % able above if mulcedinens L 1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign t indicate a negative net present value. If required, round to the nearest dollar. Present value of net cash flow total Less amount to be invested Net present value 2. The warehouse has a Warehouse Tracking Technology net 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.