The capital investment committee of Cross Continent Trucking Inc. is considering two capital investments. The estimated income from operations and net cash flows from each investment are as follows:
Each project requires an investment of $480,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for purposes of the net present value analysis.
|Present Value of $1 at Compound Interest|
1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place.
|Average Rate of Return|
1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value.
|Present value of net cash flow total||$||$|
|Less amount to be invested||$||$|
|Net present value||$||$|
2. The warehouse has a Select: larger OR smaller net present value because Select: largerOR smaller cash flows occur earlier in time compared to the tracking technology. Thus, if only one of the two projects can be accepted, the Select:tracking technology OR warehouse would be the more attractive.
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