Average Rate of Return Method, Net Present Value Method, and Analysis The capital...
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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 Income from Net Caslh Flow Income from Net Caslh Flow Year Operations Operations $43,700 43,700 43,700 43,700 43,700 $218,500 $131,000 131,000 131,000 131,000 131,000 $655,000 $92,000 70,000 35,000 15,000 6,500 $218,500 $210,000 177,000 124,000 85,000 59,000 $655,000 2 4 Total Each project requires an investment of $460,000. 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 12% 0.943 0.909 0.893 0.870 0.833 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 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 0.558 0.386 0.322 0.247 0.162 Year 6% 10% 15% 20% 2 4 6 8
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