The capital investment committee of Nature€™s Beauty 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 $80,000. 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.

Instructions
1. Compute the following:
a. The average rate of return for each investment.
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 Income from Income from Operations 19,000 Net Cash Flow Year Operations $125,000