ebook Show Me How Print item 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 $45.900 5151,000 596,000 $242,000 2 45.900 151,000 73,000 204,000 3 45.900 151,000 37,000 143,000 45.900 151,000 16,000 98,000 5 45,900 151,000 7,500 68,000 Total $229,500 5755,000 $229,500 $755.000 Each project requires an investment of $540,000. 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 69 1090 129 159 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.090 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.655 0.579 RU 4 de num prt VCE WS 6 & 7 back 00 9 Y olip { [ ] Each project requires an investment of $540,000. 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 640 10% 129 15% 20% 1 0.943 0.909 0.893 0.870 0.833 0.890 0.826 0.792 0.756 0.694 3 0.840 0.751 0,712 0.653 0,579 4 0.792 0.633 0.630 0.572 0.482 5 0.947 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 0.375 0.279 8 0.627 0.467 0,404 0.327 0.233 5 0.592 0.424 0.361 0.264 0.194 10 0.558 0.386 0.322 0.247 0.162 Required: 1a. Compute the average rate of return for each investment Average Rate of Return Warehouse Tracking Technology 11 72 113 ta num We DESCE 7 backspace 5 7 00 9 o 5 T Y U o P [ 1 I ente 7 0.665 0.513 0,452 0.279 0.376 0.327 B 0.627 0.467 0.404 0.233 9 0.592 0.424 0.36: 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 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. If required, round to the nearest dollar. Warehouse Tracking Technology Presunt value of net cash flow total Less amount to be invested Net present value 2. The warehouse has net present value as tracking technology cash flows occur Thus, If only one of the two projects can be accepted, the would be the more attractive in time Rp KE d nuk DA VER & 7 . 00 6 9 Y U O P { H pu L