The capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income...

  

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The capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Warehouse Operating Income Year 1 2 3 4 5 Total Year 1 2 3 4 5 6 7 8 9 Robotic Assembler Robotic Assembler Operating Income Net Cash Flow $180,000 180,000 180,000 180,000 180,000 $900,000 10 $58,800 58,800 58,800 58,800 58,800 $294,000 $123,000 94,000 0.636 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 15% for purposes of the net present value analysis. Present Value of $1 at Compound Interest 6% 12% 15% 10% 0.909 0.943 0.893 0.870 0.890 0.826 0.797 0.756 0.840 0.712 0.658 0.751 0.683 0.792 0.572 0.747 0.621 0.567 0.497 0.705 0.564 0.507 0.432 0.665 0.513 0.452 0.376 0.327 0.627 0.467 0.404 0.592 0.424 0.361 0.284 0.194 0.558 0.386 0.322 0.247 0.162 47,000 21,000 9,000 $294,000 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 Warehouse Net Cash Flow $288,000 243,000 171,000 117,000 81,000 0.233 $900,000 Required: 1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place. Required: 1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place. Average Rate of Return Robotic Assembler Warehouse % 1b. 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. Robotic Assembler Warehouse $ 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 robotic assembler has a net present value because cash flows occur the more attractive. $ in time compared to the warehouse. Thus, if only one of the two projects can be accepted, the would be The capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Warehouse Operating Income Year 1 2 3 4 5 Total Year 1 2 3 4 5 6 7 8 9 Robotic Assembler Robotic Assembler Operating Income Net Cash Flow $180,000 180,000 180,000 180,000 180,000 $900,000 10 $58,800 58,800 58,800 58,800 58,800 $294,000 $123,000 94,000 0.636 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 15% for purposes of the net present value analysis. Present Value of $1 at Compound Interest 6% 12% 15% 10% 0.909 0.943 0.893 0.870 0.890 0.826 0.797 0.756 0.840 0.712 0.658 0.751 0.683 0.792 0.572 0.747 0.621 0.567 0.497 0.705 0.564 0.507 0.432 0.665 0.513 0.452 0.376 0.327 0.627 0.467 0.404 0.592 0.424 0.361 0.284 0.194 0.558 0.386 0.322 0.247 0.162 47,000 21,000 9,000 $294,000 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 Warehouse Net Cash Flow $288,000 243,000 171,000 117,000 81,000 0.233 $900,000 Required: 1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place. Required: 1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place. Average Rate of Return Robotic Assembler Warehouse % 1b. 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. Robotic Assembler Warehouse $ 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 robotic assembler has a net present value because cash flows occur the more attractive. $ in time compared to the warehouse. Thus, if only one of the two projects can be accepted, the would be

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1a To compute the average rate of return for each investment we need to calculate the average annual ... View the full answer