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Varehouse % Tracking Technology % b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use tl o indicate a negative net present value. Warehouse Tracking Technology Present value of net cash flow total 2$ Less amount to be invested $ $ Net present value - The warehouse has a net present value as tracking technology cash flows occur me. Thus, if only one of the two projects can be accepted, the would be the more attractive.

Varehouse % Tracking Technology % b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use tl o indicate a negative net present value. Warehouse Tracking Technology Present value of net cash flow total 2$ Less amount to be invested $ $ Net present value - The warehouse has a net present value as tracking technology cash flows occur me. Thus, if only one of the two projects can be accepted, the would be the more attractive.

FINANCIAL ACCOUNTING
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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2. Dropdown menu 1 options are larger or smaller. Dropdown menu 2 options are earlier, more evenly or later. Dropdown menu 3 options are tracking technology or warehouse. 

Average Rate of Return Method, Net Present Value Method, and Analysis The capital investment committee of Ellis Transport and Storage Inc. is considering two investment projects. The estimated income from operations and net cash flows from each investment are as follows: Warehouse Tracking Technology Income from Net Cash Income from Net Cash Year Operations Flow Operations Flow 1 $41,400 $130,000 $87,000 $208,000 41,400 130,000 66,000 176,000 3 41,400 130,000 33,000 124,000 4 41,400 130,000 14,000 85,000 41,400 130,000 7,000 57,000 Total $207,000 $650,000 $207,000 $650,000 Each project requires an investment of $460,000. 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 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 9. 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162
Transcribed Image Text:Average Rate of Return Method, Net Present Value Method, and Analysis The capital investment committee of Ellis Transport and Storage Inc. is considering two investment projects. The estimated income from operations and net cash flows from each investment are as follows: Warehouse Tracking Technology Income from Net Cash Income from Net Cash Year Operations Flow Operations Flow 1 $41,400 $130,000 $87,000 $208,000 41,400 130,000 66,000 176,000 3 41,400 130,000 33,000 124,000 4 41,400 130,000 14,000 85,000 41,400 130,000 7,000 57,000 Total $207,000 $650,000 $207,000 $650,000 Each project requires an investment of $460,000. 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 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 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. Average Rate of Return Warehouse % Tracking Technology % 1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value. Warehouse Tracking Technology Present value of net cash flow total $ 2$ Less amount to be invested $ Net present value 2. The warehouse has a net present value as tracking technology cash flows occur in time. Thus, if only one of the two projects can be accepted, the would be the more attractive.
Transcribed Image Text:Required: 1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place. Average Rate of Return Warehouse % Tracking Technology % 1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value. Warehouse Tracking Technology Present value of net cash flow total $ 2$ Less amount to be invested $ Net present value 2. The warehouse has a net present value as tracking technology cash flows occur in time. Thus, if only one of the two projects can be accepted, the would be the more attractive.
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