eBook Show Me How Print Item Average Rate of Return Method, Net Present Value Method, and Analysis for a service company Year The capital investment committee of Arches Landscaping Company is considering two capital Investments. The estimated operating income and net cash flows from each Investment are as follows: Front-End Loader Greenhouse Operating Net Cash Operating Net Cash Income Flow Income Flow 1 $44,100 $135,000 $93,000 $216,000 2 44,100 135,000 71,000 182,000 3 44,100 135,000 35,000 128,000 4 44,100 135,000 15,000 88,000 5 44,100 135,000 6,500 61,000 Total $220,500 $675,000 $220,500 $675,000 Each project requires an investment of $420,000. 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. Year 1 2. Present Value of $1 at Compound Interest 69 1096 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 3 4 5 6 0.705 0.335 0.564 0.507 0.432 7 0.665 0.513 0.279 0.452 0.376 0.327 8 0.467 0.404 0.233 0.627 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 Front-End Loader Greenhouse We 1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, round to the nearest dollar. If required, use the minus sign to indicate a negative net present value. Previous Next Charly My Work 10 more Check My Work uses remaining Total $220,500 $675,000 $220,500 $675,000 Each project requires an investment of $420,000. 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, Year Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 1 2 0.890 0.826 0.797 0.756 0.694 0.840 5 7 B 0.751 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 6 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 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Required: la. Compute the average rate of return for each investment. If required, round your answer to one decimal place. Average Rate of Return Front-End Loader Greenhouse 1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, round to the nearest dollar. If required, use the minus sign to indicate a negative net present value Front-End Loader Greenhouse Present value of net cash flow Amount to be invested Net present value 2. Prepare a brief report for the capital investment committee, advising it on the relative merits of the two Investments The front-end onder has a net present value because cash flows occur time compared to the greenhouse. Thus, if only one of the two projects can be accepted, the would be the more attractive. in Previous Check My Work 10 more Check My Work uses remaining Next > Save and Exit Submit Assignment for Grading