Extracted text: Problem 26-1A Question 1 a Average annual rate of return for both projects % b Net Present Value for Front-End Loader Net Present Value for Greenhouse Fixtures
Extracted text: The capital investment committee of Nature's Portrait Landscaping Company is considering two capital investments. The estimated income from operations and net cash flows from each investment are as follows: Front-End Loader Greenhouse Fixtures Income from Net Cash Income from Net Cash Year Operations $25,000 Flow $40,000 Operations $11,250 Flow 1 $26,250 2 20,000 35,000 11,250 26,250 3 7,000 22,000 11,250 26,250 4 3,000 18,000 11,250 26,250 5 1,250 16,250 11,250 26,250 Total $56,250 $131,250 $56,250 $131,250 Each project requires an investment of $75,000. 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. Instructions: 1. Compute the following: a. The average rate of return for each investment. Round to one decimal point. b. The net present value for each investment. Use the present value of $1 table appearing in this chapter (Exhibit 2). Round present values to the nearest dollar.