Average Rate of Return Method, Net Present Value Method, andAnalysis

The capital investment committee of Ellis Transport and StorageInc. is considering two investment projects. The estimated incomefrom operations and net cash flows from each investment are asfollows:

	Warehouse					Tracking Technology
Year	Income from Operations		Net Cash Flow			Income from Operations		Net Cash Flow
1	$46,000		$142,000			$97,000		$227,000
2	46,000		142,000			74,000		192,000
3	46,000		142,000			37,000		135,000
4	46,000		142,000			16,000		92,000
5	46,000		142,000			6,000		64,000
Total	$230,000		$710,000			$230,000		$710,000

Each project requires an investment of $460,000. Straight-linedepreciation will be used, and no residual value is expected. Thecommittee has selected a rate of 10% for purposes of the netpresent value analysis.

Present Value of $1 at CompoundInterest
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 eachinvestment. If required, round your answer to one decimalplace.

	Average Rate of Return
Warehouse	%
Tracking Technology	%

1b. Compute the net present value for eachinvestment. 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	$	$
Less amount to be invested	$	$
Net present value	$	$

2. The warehouse has a net present value astracking technology cash flows occur     in time. Thus, if only one of the two projects can be accepted,the   would be the more attractive.