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1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place. Robotic Assembler Warehouse Average Rate of Return 96 96 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. Robotic Assembler Present value of net cash flow S Amount to be invested Net present value Warehouse

1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place. Robotic Assembler Warehouse Average Rate of Return 96 96 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. Robotic Assembler Present value of net cash flow S Amount to be invested Net present value Warehouse

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 1PA: Average rate of return method, net present value method, and analysis for a service company The...
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Average rate of return method, net present value method, and analysis for a service company 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: Robotic Assembler Robotic Assembler Warehouse Operating Year Operating Income Net Cash Flow Income Warehouse Net Cash Flow 1 $36,000 $113,000 $76,000 $181,000 2 36,000 113,000 58,000 153,000 3 36,000 113,000 29,000 107,000 4 36,000 113,000 13,000 73,000 5 36,000 113,000 4,000 Total $180,000 $565,000 $180,000 51,000 $565,000 Each project requires an investment of $400,000. 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 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. 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. Present value of net cash flow Amount to be invested Net present value Robotic Assembler Warehouse
Transcribed Image Text:Average rate of return method, net present value method, and analysis for a service company 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: Robotic Assembler Robotic Assembler Warehouse Operating Year Operating Income Net Cash Flow Income Warehouse Net Cash Flow 1 $36,000 $113,000 $76,000 $181,000 2 36,000 113,000 58,000 153,000 3 36,000 113,000 29,000 107,000 4 36,000 113,000 13,000 73,000 5 36,000 113,000 4,000 Total $180,000 $565,000 $180,000 51,000 $565,000 Each project requires an investment of $400,000. 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 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. 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. Present value of net cash flow Amount to be invested Net present value Robotic Assembler Warehouse
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