1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place. Robotic Assembler Warehouse Average Rate of Return 96 96 1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, round to the nearest dollar. If required, use the minus sign to indicate a negative net present value. Robotic Assembler Present value of net cash flow S Amount to be invested Net present value Warehouse
1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place. Robotic Assembler Warehouse Average Rate of Return 96 96 1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, round to the nearest dollar. If required, use the minus sign to indicate a negative net present value. Robotic Assembler Present value of net cash flow S Amount to be invested Net present value Warehouse
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
hsd.4
Transcribed Image Text:Average rate of return method, net present value method, and analysis for a service company
The capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net cash flows from each investment are as
follows:
Robotic Assembler
Robotic Assembler
Warehouse
Operating
Year
Operating Income
Net Cash Flow
Income
Warehouse
Net Cash Flow
1
$36,000
$113,000
$76,000
$181,000
2
36,000
113,000
58,000
153,000
3
36,000
113,000
29,000
107,000
4
36,000
113,000
13,000
73,000
5
36,000
113,000
4,000
Total
$180,000
$565,000
$180,000
51,000
$565,000
Each project requires an investment of $400,000. 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
Robotic Assembler
Warehouse
%
%
1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, round to the nearest dollar. If required, use the minus sign to
indicate a negative net present value.
Present value of net cash flow
Amount to be invested
Net present value
Robotic Assembler
Warehouse
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