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 $48,000 $101,000 $240,000 48,000 $150,000 150,000 150,000 77,000 203,000 48,000 38,000 143,000 48,000 98,000 150,000 150,000 17,000 7,000 48,000 66,000 Total $240,000 $750,000 $240,000 $750,000 Each project requires an investment of $480,000. 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 0.890 0.792 Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% 0.943 0 .909 0.893 0.870 0.833 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 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 0.361 0.284 0.194 0 .558 0.386 0.322 0.247 0.162 0.424 10 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 earlier 4 9 more evenly 0 Present value of net cash flow total Less amount to be invested larger Net present value smaller 99 later 1 in 2. The warehouse has a net present value as tracking technology cash flows occur time. Thus, if only one of the two projects can be accepted, the would be the more attractive. tracking technology warehouse