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 Net Cash Income from Net Cash Year Operations Flow Operations Flow 1 $39,100 $123,000 $82,000 $197,000 2 39,100 123,000 63,000 166,000 3 39,100 123,000 31,000 117,000 39,100 123,000 14,000 80,000 5 39,100 123,000 5,500 55,000 Total $195,500 $615,000 $195,500 $615,000 4 Each project requires an investment of $460,000. 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 0.909 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 0.482 4 0.792 0.683 0.636 0.572 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 0.279 7 0.665 0.513 0.452 0.376 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. If required, round your answer to one decimal place. Average Rate of Return Warehouse % 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 Tracking Technology Present value of net cash flow total Less amount to be invested Net present value 2. The warehouse has a smaller net present value as tracking technology cash flows occur earlier in time. Thus, if only one of the two projects can be accepted, the tracking technology would be the more attractive