1. 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	$37,800		$120,000			$79,000		$192,000
   2	37,800		120,000			60,000		162,000
   3	37,800		120,000			30,000		114,000
   4	37,800		120,000			13,000		78,000
   5	37,800		120,000			7,000		54,000
   Total	$189,000		$600,000			$189,000		$600,000

   Each project requires an investment of $360,000. 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	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

   • larger
   • smaller
   net present value as tracking technology cash flows occur
   • earlier
   • more evenly
   • later
   in time. Thus, if only one of the two projects can be accepted, the
   • tracking technology
   • warehouse
   would be the more attractive.