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eBook Show Me How Print Item Average Rate of Return Method, Net Present Value Method, and Analysis for a service company The capital investment committee of Arches Landscaping Company is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Front-End Loader Greenhouse Operating Year Operating Income Income Net Cash Flow 1 $56,700 $185,000 $119,000 $296,000 2 56,700 185,000 91,000 250,000 3 56,700 185,000 45,000 176,000 56,70p 185,000 20,000 120,000 5 56,700 185,000 8,500 83,000 Total $283,500 $925,000 $283,500 $925,000 Each project requires an investment of $540,000. 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. Present Value of $1 at Compound Interest Year 6% 15% 20% 10% 0,909 12% 0.893 0.870 1 0.943 0.833 2 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.792 0.579 0.683 0.636 0.572 0.482 0.621 0.567 0.497 0.402 0.335 0.747 0.705 0.564 0.507 0.432 Previous Next > Email Instructor Submit Assignment for Grading 3 4 5 6 Check My Work Net Cash Flow All work saved. Save and Exit
Show Me How Print them Each project requires an investment of $540,000. 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. 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 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 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 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 Front-End Loader 21 % Greenhouse 21 ✓% 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. Front-End Loader Greenhouse Present value of net cash flow Previous Next Check My Work Email Instructor Save and Exit Submit Assignment for Grading All work saved.
26.15 ALGO 226 21 EXCEL ALGO 226-07 EXCEL ALGO 26-16 EXCEL ALGO 26.01A ALGO 6.21 ALGO 6.12 ALGO 5.05.ALGO 3.01.ALGO 26.06 6.04A.ALGO 8.04.ALGO 26.03 5/13 items Required: 1a. Compute the average rate of retum for each investment. If required, round your answer to one decimal place Average Rate of Return 21 Front-End Loader Greenhouse 1b. Compute the pet present value for each investment Use the present value of $1 table above. If required, round to the nearest dollar. If required, use the mus sign to indicate a negative net present value. Front-End Leader Greenhouse Present value of net cash flow Amount to be invested $40,000 540,000 Net present value 2. Prepare a brief report for the capital investment committas, advising it on the relativements of the two investments. The front-end loader has a smaller ✔in time compared to the greenhouse. Thus, it only one of the ✔net present valve because cash flows accur later ✔would be the more attractive. two projects can be accepted, the greenhouse foodbak Ta. Divide healed average annual income by the ageinste 16. For each investment multiply the present value factor for each earbe 2) by that year's nat caan fowe Subtract the amount to be invested to the total rent value of the nat cash flow. Which investment offers the more favorable at present vala 2. Consider when cash flows are received and the time value of money Previous Next Check My Work