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ired: Compute the average rate of return for each investment. If required, round your answer to one decimal place.

ired: Compute the average rate of return for each investment. If required, round your answer to one decimal place.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Capital Investment Analysis: Arches Landscaping Company

Required: Accounting numeric field 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
Transcribed Image Text:Required: Accounting numeric field 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
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 Net Cash Operating Net Cash Year Income Flow Income Flow 1 $55,800 $180,000 $117,000 $288,000 2 55,800 180,000 89,000 243,000 3 55,800 180,000 45,000 171,000 4 55,800 180,000 20,000 117,000 55,800 180,000 8,000 81,000 Total $279,000 $900,000 $279,000 $900,000 Each project requires an investment of $620,000. 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 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 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.
Transcribed Image Text: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 Net Cash Operating Net Cash Year Income Flow Income Flow 1 $55,800 $180,000 $117,000 $288,000 2 55,800 180,000 89,000 243,000 3 55,800 180,000 45,000 171,000 4 55,800 180,000 20,000 117,000 55,800 180,000 8,000 81,000 Total $279,000 $900,000 $279,000 $900,000 Each project requires an investment of $620,000. 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 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 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.
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