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

The capital investment committee of Cross Continent TruckingInc. is considering two capital investments. 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	$24,000		$77,000			$50,000		$123,000
2	24,000		77,000			38,000		104,000
3	24,000		77,000			19,000		73,000
4	24,000		77,000			8,000		50,000
5	24,000		77,000			5,000		35,000
Total	$120,000		$385,000			$120,000		$385,000

Each project requires an investment of $400,000. Straight-linedepreciation will be used, and no residual value is expected. Thecommittee has selected a rate of 12% 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