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 operating income and not cash flows from each Investment are as follows: Front-End Loader Greenhouse Operating Net Cash Operating Net Cash Year Income Flow Income Flow 1 $50,400 $155,000 $105,000 $248,000 2 50,400 155,000 81,000 209,000 3 50,400 155,000 40,000 147.000 50.400 155,000 18,000 101.000 5 50,400 155,000 7,000 70,000 Total 5252,000 3775,000 $252,000 $775,000 4 Each project requires an investment of $400,000. Stratone-line depreciation will be used, and no residual value is expected. The committolhas selected a rate of 15 for purposes of the net present value analysis. Year 1 Present Value of $1 at Compound Interest 10 12% 15% 2014 0.945 0.909 0.893 0.370 0.833 0.690 0.620 0.797 0.750 0.694 0.840 0.751 0.712 0.65 0.570 Each project requires an investment of $480,000. 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. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.909 0.893 0.870 0.833 0.943 0.890 2 0.826 0.797 0.756 0.694 3 0.840 0.751 0.658 0.579 0.712 0.636 4 0.683 0.572 0.482 0.792 0.747 5 0.621 0.567 0.497 0.402 6 0.705 0.507 0.335 0.564 0.513 0.432 0.376 7 0.665 0,452 0.279 8 0.627 0.404 0.327 0.233 0.467 0.424 9 0.592 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Required: ia. 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 16. Compute the net present value for each investment. Use the present value of $1 table above. If required, round to the nearest dollar. If required, use the minus sign to indicate a 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, only one of the two projects can be accepted, the would be the more attractive