Average Rate of Return Method, Net Present Value Method, and Analysis for a service company The capital investment committee of Arches Landscaping Company is considering two capital investments. The estimated income from operations and net cash flows from each investment are as follows: Front-End Loader Greenhouse Income from Net Cash Income from Net Cash Year Operations Flow Operations Flow $54,600 $165,000 $115,000 $264,000 54,600 165,000 87,000 223,000 54,600 165,000 44,000 157,000 54,600 165,000 19,000 107.000 54,600 165,000 74,000 $273,000 Total $325,000 $273,000 $825,000 8,000 Each project requires an investment of $520,000. 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. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 Previous Next > 213,000 $825,000 Each project requires an investment of $520,000. Straight-line depreciation will be used, and no residual value is expected. The comme selected a rate of 10% for purposes of the net present value analysis. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.833 0.890 0.9090.893 0.826 0.797 0.751 0.712 0.683 0.636 0.694 0.579 0.840 0.792 0.482 0.747 0.621 0.402 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 0.705 0.564 0.665 0.513 0.627 0.592 0.558 0.467 0.424 0.386 0.507 0.452 0.404 0.361 0.322 0.335 0.279 0.233 0.194 0.162 0.665 0.376 0.279 0.627 0.513 0.467 0.424 0.327 0.452 0.404 0.361 0.322 0.233 0.592 0.558 0.194 0.386 0.284 0.247 0.162 Required: 1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place. Average Rate of Return Front-End Loader Greenhouse 1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign to indicate negative net present value. Front-End Loader Greenhouse Present value of net cash flow Amount to be invested Net present value 2. Prepare a brief report for the capital investment committee, advising it on the relative merits of the two investments. The front-end loader has a net present value because cash flows occur in time compared to the greenhouse. Thus, if only one of the two projects can be accepted, the would be the more attractive. la. Compute the average rate of return for each investment. If required, round your answer to one decimal place Front-End Loader Greenhouse Average Rate of Return C % 1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign to ind negative net present value. Front-End Loader Present value of net cash flow Greenhouse Amount to be invested Net present value smaller 2. Prepare a brief report for the larger vestment committee, advising it on the relative merits of the two investments. The front-end loader has a net present value because cash flows occur in time compared to the greenhouse. Thus, if only one of the lo projects can be accepted, the would be the more attractive. Previous - 4 Julent. If required, round your answer to one decimal place, Rate of Return h investment. Use the present value of $1 table above. If required, use the minus sign to indic Front-End Loader Greenhouse earlier tment committee, advising it on the relative merits o later investments. net present value because cash flows occur in time compared to the ects can be accepted, the would be the more attractive. Previous for each investment. Use the present value of $1 table above. If required, use Front-End Loader Greenhouse $ al investment committee, advising front-end loader erits of the two investm greenhouse net present value becau vo projects can be accepted, the in would be the more attr