Required:1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place.Average Rate of ReturnFront-End LoaderGreenhouse%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 LoaderGreenhousePresent value of net cash flowAmount to be investedNet present value$2. Prepare a brief report for the capital investment committee, advising it on the relative merits of the two investments.The front-end loader has anet present value because cash flows occurin time compared to the greenhouse. Thus, if only one of the two projects can be accepted, thewould be the more attractive. Average Rate of Return Method, Net Present Value Method, and Analysis for a service companyThe 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 LoaderGreenhouseOperatingNet CashOperatingNet CashYearIncomeFlowIncomeFlow1$54,000$174,000$113,000$278,00054,000174,00086,000235,000354,000174,00043,000165,000454,000174,00019,000113,00054,000174,0009,00079,000Total$270,000$870,000$270,000$870,000Each project requires an investment of $600,000. 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 InterestYear6%10%12%15%20%10.9430.9090.8930.8700.83320.8900.8260.7970.7560.69430.8400.7510.7120.6580.57940.7920.6830.6360.5720.4820.7470.6210.5670.4970.40260.7050.5640.5070.4320.33570.6650.5130.4520.3760.27980.6270.4670.4040.3270.23390.5920.4240.3610.2840.194100.5580.3860.3220.2470.162Required:1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place.Average Rate of ReturnCheck My Work 10 more Check My Work uses remaining.PreviousNext

Part 1 a: The Average Rate of returns can be computed = Average Income Average Investment Where…

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 2. Prepare a brief report for the capital investment committee, advising it on the relative merits of the two investments. The front-end loader has a net present value because cash flows occur in time compared to the greenhouse. Thus, if only one of the two projects can be accepted, the would be the more attractive.

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 2. Prepare a brief report for the capital investment committee, advising it on the relative merits of the two investments. The front-end loader has a net present value because cash flows occur in time compared to the greenhouse. Thus, if only one of the two projects can be accepted, the would be the more attractive.

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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