Cash payback period for a Service Company Prime Financial Inc. is evaluating two capital investment proposals for a drive-up ATM kiosk, each requiring an investment of $125,000 and each with an eight-year life and expected total net cash flows of $200,000. Location 1 is expected to provide equal annual net cash flows of $25,000, and Location 2 is expected to have the following unequal annual net cash flows: Year 1 $56,000 Year 5 $18,000 Year 2 43,000 Year 6 14,000 Year 3 26,000 Year 7 11,000 Year 4 24,000 Year 8 8,000 Determine the cash payback period for both location proposals. Location 1 years Location 2 years 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 Income from Operations Year Tracking Technology Income from Net Cash Operations Flow Net Cash Flow 1 $60,900 $188,000 $128,000 $301,000 2 60,900 188,000 97,000 254,000 3 60,900 188,000 49,000 179,000 4 60,900 188,000 21,000 122,000 5 60,900 188,000 9,500 84,000 Total $304,500 $940,000 $304,500 $940,000 Each project requires an investment of $580,000. 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 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. 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 in time. Thus, if only net present value as tracking technology cash flows occur would be the more attractive. one of the two projects can be accepted, the