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# 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

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:

 Warehouse Tracking Technology Year Income fromOperations Net CashFlow Income fromOperations Net CashFlow 1 \$52,800 \$162,000 \$111,000 \$259,000 2 52,800 162,000 84,000 219,000 3 52,800 162,000 42,000 154,000 4 52,800 162,000 18,000 105,000 5 52,800 162,000 9,000 73,000 Total \$264,000 \$810,000 \$264,000 \$810,000

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 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 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.

May 21 2020 View more View Less