The capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Year Robotic AssemblerOperating Income Robotic AssemblerNet Cash Flow WarehouseOperating Income WarehouseNet Cash Flow 1 $48,000 $152,000 $101,000 $243,000 2 48,000 152,000 77,000 205,000 3 48,000 152,000 38,000 144,000 4 48,000 152,000 17,000 99,000 5 48,000 152,000 7,000 69,000 Total $240,000 $760,000 $240,000 $760,000 Each project requires an investment of $480,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for purposes of the net present value analysis. 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. Investment Committee Average Rate of Return Robotic Assembler % Warehouse % 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. Line Item Description Robotic Assembler Warehouse Present value of net cash flow $fill in the blank 3 $fill in the blank 4 Amount to be invested fill in the blank 5 fill in the blank 6 Net present value $fill in the blank 7 $fill in the blank 8
The capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net
Year | Robotic Assembler Operating Income |
Robotic Assembler Net Cash Flow |
Warehouse Operating Income |
Warehouse Net Cash Flow |
---|---|---|---|---|
1 | $48,000 | $152,000 | $101,000 | $243,000 |
2 | 48,000 | 152,000 | 77,000 | 205,000 |
3 | 48,000 | 152,000 | 38,000 | 144,000 |
4 | 48,000 | 152,000 | 17,000 | 99,000 |
5 | 48,000 | 152,000 | 7,000 | 69,000 |
Total | $240,000 | $760,000 | $240,000 | $760,000 |
Each project requires an investment of $480,000. Straight-line
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
Investment Committee | Average Rate of Return |
---|---|
Robotic Assembler | % |
Warehouse | % |
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.
Line Item Description | Robotic Assembler | Warehouse |
---|---|---|
Present value of net cash flow | $fill in the blank 3 | $fill in the blank 4 |
Amount to be invested | fill in the blank 5 | fill in the blank 6 |
Net present value | $fill in the blank 7 | $fill in the blank 8 |
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