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:

Each project requires an investment of $ 368,000. Straight- line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for purposes of the net present value analysis.

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 (Exhibit 1).
2. Prepare a brief report for the capital investment committee, advising it on the relative merits of the twoprojects.

  • CreatedJune 27, 2014
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