Front-End Loader Greenhouse Fixtures Income from Net Cash Income from Net Cash Year Operations Flow Operations Flow 1 $25,000 $ 40,000 $11,250 $ 26,250 20,000 35,000 11,250 26,250 3 7,000 22,000 11,250 26,250 4 3,000 18,000 11,250 26,250 5 1,250 16,250 11,250 26,250 Total $56,250 $131,250 $56,250 $131,250 2.
Average
The capital investment committee of Nature's Portrait Landscaping
Company is considering two capital investments. The estimated income
from operations and net cash flows from each investment are as follows:
Each project requires an investment of $75,000. 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.
Instructions
1. Compute the following:
a. The average rate of
decimal place.
b. The net present value for each investment. Use the present value
of $1 table appearing in this chapter (Exhibit 2). Round present values to the nearest dollar.
2. Prepare a brief report for the capital investment committee, advising it on the relative merits of the two investments.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
