**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:| Year | Front-End Loader Operating Income | Front-End Loader Net Cash Flow | Greenhouse Operating Income | Greenhouse Net Cash Flow ||------|-----------------------------------|-------------------------------|-----------------------------|---------------------------|| 1 | $46,200 | $145,000 | $97,000 | $232,000 || 2 | 46,200 | 145,000 | 74,000 | 196,000 || 3 | 46,200 | 145,000 | 37,000 | 138,000 || 4 | 46,200 | 145,000 | 16,000 | 94,000 || 5 | 46,200 | 145,000 | 7,000 | 65,000 || **Total** | **$231,000** | **$725,000** | **$231,000** | **$725,000** |Each project requires an investment of $420,000. 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**| 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|This table displays the present value of $1 at various interest rates over three years, which is useful for calculating the net present value of future cash flows for investment appraisal. **Educational Content: Present Value of $1 Table and Investment Calculations****Present Value of $1:**This table provides the present value (PV) of $1 for different interest rates (from 4% to 15%) over the course of 10 years. The table lists the present value factors needed to discount future cash flows to present values. | Year | 4% | 6% | 8% | 10% | 12% | 15% ||------|------|------|------|------|------|------|| 1 | 0.962| 0.943| 0.926| 0.909| 0.893| 0.870|| 2 | 0.925| 0.890| 0.857| 0.826| 0.797| 0.756|| 3 | 0.889| 0.840| 0.793| 0.751| 0.712| 0.658|| 4 | 0.855| 0.792| 0.735| 0.683| 0.636| 0.572|| 5 | 0.822| 0.747| 0.681| 0.621| 0.567| 0.497|| 6 | 0.790| 0.705| 0.630| 0.564| 0.507| 0.432|| 7 | 0.760| 0.665| 0.583| 0.513| 0.452| 0.376|| 8 | 0.731| 0.627| 0.540| 0.467| 0.404| 0.327|| 9 | 0.703| 0.592| 0.500| 0.424| 0.361| 0.284|| 10 | 0.676| 0.558| 0.463| 0.386| 0.322| 0.247|**Required Tasks:**1a. **Average Rate of Return:** - Compute the average rate of return for each investment option:

Average rate of return : It is the average annual yield on the project i.e., average profit after…

Required: la. 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 X % Greenhouse X % 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

Required: la. 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 X % Greenhouse X % 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

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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REQUIRED Study the information given below and answer the following questions: 1. Calculate the Payback Period (expressed in years, months and days). 2. Calculate the Accounting Rate of Return on average investment (expressed to two decimal places). 3. Identify TWO (2) reasons why Umdloti Limited should not use the accounting rate of return to evaluate capital investments. 4. Calculate the Net Present Value. 5. Calculate the Internal Rate of Return (expressed to two decimal places) if the net cash flows are R320 000 per year for five years. Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation.
Consider the following cash flows: Year 0 1 2 Cash Flow -$ 32,500 13,800 17,900 11, 200 What is the IRR of the cash flows? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Internal rate of return %
500 Calculate the value of X to suit this cash flow diagram with i = 9%. X is an end of period payment. Provide modified cash flow diagram(s) necessary for your solution, and show all work. 400 300 200 100 2.
3. Find the internal rate of return
Please do not give solution in image format thanku
a. Find the present values of the following cash flow streams at an 8% discount rate. Do not round intermediate calculations. Round your answers to the nearest cent. 0 1 2 3 4 5 Stream A $0 $100 $350 $350 $350 $300 Stream B $0 $300 $350 $350 $350 $100 Stream A: $ Stream B: $ b. What are the PVs of the streams at a 0% discount rate? Round your answers to the nearest dollar. Stream A: $ Stream B: $
a. Find the present values of the following cash flow streams at a 6% discount rate. Do not round intermediate calculations. Round your answers to the nearest cent. 1 3 4 Stream A $0 $150 $400 $400 $400 $300 Stream B $0 $300 $400 $400 $400 $150 Stream A: $ Stream B: $ b. What are the PVs of the streams at a 0% discount rate? Round your answers to the nearest dollar. Stream A: $ Stream B: $
16)For the following stream of free cash flows, calculate the internal rate of return. Year 0 1 2 3 4 5 Free Cash Flows -45,452 10,005 14,921 12,537 10,452 21,455 Group of answer choices 14.5% 12.7% 13.9% 11.5%
(a) Calculate the equivalent amount P at the present time. The equivalent amount P at the present time is $ (b) Calculate the single-payment equivalent to F at n = 5. The single-payment equivalent to Fat n = 5 is $ (Round to the nearest dollar.) (c) Calculate the equivalent equal-payment series cash flow A that runs from n=1 to n = 5. The equivalent equal-payment series cash flow A is $ (Round to the nearest dollar.) (Round to the nearest dollar.)
Net Present Value Use Exhibit 128.1 and Exhibit 128.2 to locate the present value of an annuity of $1, which is the amount to be multiplied times the future annual cash flow amount. Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. a. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $2,650,000 and will lam 10 years. b. Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $180,000. She estimates that the return from owning her own sta will be $35,000 per year. She estimates that the shop will have a useful life of 6 years. c. Barker Company calculated the NPV of a project and found it to be $63,900. The project's life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10%. The project was expected to produce annual after-tax cash flows of $135,000. Required: 1.…

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