1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place.Average Rate of ReturnFront-End LoaderGreenhousePresent value of net cash flow%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 toindicate a negative net present value.Amount to be invested%Front-End LoaderGreenhouseNet present value2. Prepare a brief report for the capital investment committee, advising it on the relative merits of the two investments.The front-end loader has anet present value because cash flows occurprojects can be accepted, thewould be the more attractive.in time compared to the greenhouse. Thus, if only one of the two as follows:Year12345TotalYear12Investment committee of Arches Landscaping Company is considering two capital investments. The estimated operating income and net cash flows from each investment are345678Front-End Loader910OperatingIncomeEach 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 15% for purposes ofthe net present value analysis.Present Value of $1 at Compound Interest10%0.9090.826$52,00052,00052,00052,00052,000$260,0006%0.9430.8900.8400.7920.7470.7050.6650.6270.5920.5580.7510.6830.6210.5640.5130.467Net CashFlow0.4240.386$157,000157,000157,000157,000157,000$785,00012%0.8930.7970.7120.6360.5670.5070.4520.4040.3610.32215%0.8700.7560.6580.5720.4970.4320.3760.3270.2840.247GreenhouseOperatingIncome$109,00083,00042,00018,0008,000$260,00020%0.8330.6940.5790.4820.4020.3350.2790.2330.1940.162Net CashFlow$251,000212,000149,000102,00071,000$785,000

1. Average rate of return ARR = (Average annual profit / Initial investment) x 100. 2. Average…

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, 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 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 cash flows occur( projects can be accepted, the would be the more attractive. in time compared to the greenhouse. Thus, if only one of the two

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, 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 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 cash flows occur( projects can be accepted, the would be the more attractive. in time compared to the greenhouse. Thus, if only one of the two

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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