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 $116,000 $76,000 $186,000 $36,100 36,100 116,000 58,000 157,000 116,000 29,000 36,100 36,100 110,000 75,000 116,000 13,000 4,500 36,100 116,000 52,000 Total $180,500 $580,000 $180,500 $580,000 Each project requires an investment of $380,000. 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 2 3 Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% 0.9430.9090.893 0.870 0.833 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335 0.665 0.513 0.452 0.376 0.279 0.627 0.467 0.404 0.327 0.233 0.592 0.424 0.361 0.284 0.194 10 0 .558 0.386 0.322 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 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. 7 0.705 0.665 0.627 0.592 0.558 0.564 0.513 0.467 0.424 0.386 0.507 0.452 0.404 0.361 0.322 0.432 0.376 0.327 0.284 0.247 0.335 0.279 0.233 0.194 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 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 Less amount to be invested Net present value in time. 2. The warehouse has a net present value as tracking technology cash flows occur Thus, if only one of the two projects can be accepted, the would be the more attractive