Average Rate of Return Method, Net Present Value Method, and Analysis 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: Warehouse Tracking Technology Year Income from Operations Net Cash Flow Income from Operations Net Cash Flow $53,200 $167,000 $267,000 53,200 167,000 225,000 $112,000 85,000 43,000 19,000 53,200 167,000 159,000 53,200 167,000 109,000 53,200 167,000 7,000 75,000 Total $266,000 $835,000 $266,000 $835,000 Each project requires an investment of $560,000. 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. Year 1 Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% 0.943 0.9090.893 0.870 0.833 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.482 4 0.747 0.705 0.621 0.564 0.497 0.432 0.402 0.335 0.513 0.376 0.279 0.665 0.627 0.567 0.507 0.452 0.404 0.361 0.322 0.467 0.327 0.233 0.592 100.558 Required: 0.424 0.386 0.284 0.247 0.194 0.162 1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place. Average Rate of Return Warehouse % Tracking Technology 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 a negative net present value. Warehouse Tracking Technology Present value of net cash flow total A Less amount to be invested to Net present value in time. Thus, if only one of 2. The warehouse has a the two projects can be accepted, the net present value as tracking technology cash flows occur would be the more attractive