ysis or a service company d The capital investment committee of Arches Landscaping Company is considering two capital investments. and net cash flows from each investment are as follows: Front-End Loader Greenhouse Income from Operations Net Cash Income from Net Cash Year Flow Operations Flow $61,600 61,600 61,600 61,600 61,600 $308,000 $187,000 187,000 187,000 187,000 187,000 $935,000 $129,000 99,000 49,000 22,000 9,000 $299,000 252,000 178,000 122,000 84,000 $308,000 $935,000 Total Each project requires an investment of $560,000. Straight-line depreci selected a rate of 12% for purposes of the net present value analysis. ation will be used, and no residual value is expected. The committee has Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.99 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 .558 0.386 0.322 0.247 0.162 10 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 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. 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 loader has a greenhouse. Thus, if only one of the two projects can be accepted, the net present value because cash flows occur in time compared to the would be the more attractive