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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

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
1 $54,000 $177,000 $113,000 $283,000
2 54,000 177,000 86,000 239,000
3 54,000 177,000 43,000 168,000
4 54,000 177,000 19,000 115,000
5 54,000 177,000 9,000 80,000
Total $270,000 $885,000 $270,000 $885,000

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 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.

Average Rate of Return
Warehouse fill in the blank 1%
Tracking Technology fill in the blank 2%

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
Present value of net cash flow total $fill in the blank 3 $fill in the blank 4
Less amount to be invested $fill in the blank 5 $fill in the blank 6
Net present value $fill in the blank 7 $fill in the blank 8

2. The warehouse has a net present value as tracking technology cash flows occur in time. Thus, if only one of the two projects can be accepted, the would be the more attractive.

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