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The capital investment committee of Ellis Transport and Storage Inc. is considering two investment projects. The...

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
Year Income from
Operations
Net Cash
Flow
Income from
Operations
Net Cash
Flow
1 $44,000 $138,000 $92,000 $221,000
2 44,000 138,000 70,000 186,000
3 44,000 138,000 35,000 131,000
4 44,000 138,000 15,000 90,000
5 44,000 138,000 8,000 62,000
Total $220,000 $690,000 $220,000 $690,000

Each project requires an investment of $440,000. 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
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 $___ $___
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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