The capital investment committee of Estate Landscaping Company is considering two capital investments. The estimated income from operations and net cash flows from each investment are as follows:

Each project requires an investment of $70,000. 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.

Instructions
1. Compute the following:
a. The average rate of return for each investment. Round to one decimal place.
b. The net present value for each investment. Use the present value of $1 table appearing in this chapter.
2. Prepare a brief report for the capital investment committee, advising it on the relative merits of the twoinvestments.

Transcribed Image Text:

Greenhouse Skid Loader Net Cash Flow Income from Income from Operations Operations Flow ear 150,000 150,000