-The capital investment committee of Cross Continent Trucking Inc. is considerin

Question

-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 $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.

1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place.

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.

Explanation / Answer

Answer:1a Average rate of return:

Warehouse= ($165,000 / 5) / [($440,000 +$0) / 2]

=33000 / 220,000 = 0.15 = 15%

Tracking Technology= ($165,000 / 5) / [($440,000 +$0) / 2]

=33000 / 220,000 = 0.15 = 15%

Answer:1b

Particulars Warehouse Tracking Technology Present value of net cash flow totals 367710 392667 Less: amount to be invested 440000 440000 NPV -72290 -47333

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