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average rate of return method, net present, value method, and analysis for a service company

Average Rate of Return Method, Net Present Value Mathod, and Analysis for a service company The capital investment committee of Arches Landscaping Company is considering two capital investments. The estimated income from operations and net cash flows from each investment are as follows Front-End Loader Greenhouse Income from Operations Year Net Cash Flow $149,000 Income from Operations Net Cash Flow $46,800 $90,000 2 46,800 149,000 75,000 3 46,500 149,000 37,000 4 46,800 149,000 16,000 46,800 149,000 8,000 Total $234,000 $745,000 $234,000 $745,000 Each project requires an investment of $520,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 12% for purposes of the net present value analysis Present Value of $1 at Compound Interest Year 10% 12% 15% 20% 0.909 0.893 0.870 1 6% 0.943 0.890 0.840 2 0.833 0.826 0.797 0.756 0.694 0.75: 0.712 0.658 0.579 0.636 0.572 0.482 0.567 0.792 0.683 0,747 0.621 0.497 0.402 AME SLEEA PIZZ 0.330 3 4 5 $218,000 201,000 142,000 97,000 67,000 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0,627 0.467 0.404 0.327 0.233 9 0,592 0.424 0.361 0.284 0.194 0.162 10 0.558 0.396 0.322 0.247 Required: 1a. 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 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 Front-End Loader Greenhouse Present value of not 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 the cash flows occur the would be the more attractive in time compared to the greenhouse. Thus, if only one of the two projects can be accepted

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