ex7 q1

Average rate of return method, net present value method, and analysis for a service company The capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Each project requires an investment of $620,000. 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. Each project requires an investment of $620,000. 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. Required: 1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place. 1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place. 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. 2. Prepare a brief report for the capital investment committee, advising it on the relative merits of the two investments. The robotic assembler has a net present value because cash flows occur in time compared to the warehouse. Thus, if only one of the two projects can be accepted, the would be the more attractive