The capital investment committee of Touch of Eden 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 $60,000. 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 (Exhibit 2). Round present values to the nearest dollar.

2. Prepare a brief report for the capital investment committee, advising it on the relative merits of the two investments.

Exhibit 2: