The capital investment committee of Natures Beauty Landscaping Company is considering two capital investments. The estimated income

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The capital investment committee of Nature€™s Beauty Landscaping Company is considering two capital investments. The estimated income from operations and net cash flows from each investment are as follows:

The capital investment committee of Nature€™s Beauty Landscaping

Each project requires an investment of $80,000. 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.

Instructions
1. Compute the following:
a. The average rate of return for each investment.
b. The net present value for each investment. Use the present value of $1 table appearing in this chapter.
2. Prepare a brief report for the capital investment committee, advising it on the relative merits of the twoinvestments.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...
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Accounting

ISBN: 978-0324188004

21st Edition

Authors: Carl s. warren, James m. reeve, Philip e. fess

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