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.

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

Transcribed Image Text:

Warehouse Tracking Technology Income from Operations 61,400 51,400 36,400 26,400 3,600) 172,000 Net Cash Flow 135,000 125,000 110,000 100,000 70,000 Income from Net Casih Operations Year 34400 $ 34,400 34,400 34 400 34,400 Flow 108,000 108,000 108,000 108,000 108000 540,000 Total $172000