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Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402 Exercise 13
Payback and ARR
Each of the following scenarios is independent. All cash flows are after-tax cash flows.
Required:
1. Brad Blaylock has purchased a tractor for $93,750. He expects to receive a net cash flow of $31,250 per year from the investment. What is the payback period for Jim?
2. Bertha Lafferty invested $360,000 in a laundromat. The facility has a 10-year life expectancy with no expected salvage value. The laundromat will produce a net cash flow of $108,000 per year. What is the accounting rate of return?
3. Melannie Bayless has purchased a business building for $336,000. She expects to receive the following cash flows over a 10-year period:
Year 1: $42,000
Year 2: $58,800
Years 3-10: $84,000
What is the payback period for Melannie? What is the accounting rate of return?
Each of the following scenarios is independent. All cash flows are after-tax cash flows.
Required:
1. Brad Blaylock has purchased a tractor for $93,750. He expects to receive a net cash flow of $31,250 per year from the investment. What is the payback period for Jim?
2. Bertha Lafferty invested $360,000 in a laundromat. The facility has a 10-year life expectancy with no expected salvage value. The laundromat will produce a net cash flow of $108,000 per year. What is the accounting rate of return?
3. Melannie Bayless has purchased a business building for $336,000. She expects to receive the following cash flows over a 10-year period:
Year 1: $42,000
Year 2: $58,800
Years 3-10: $84,000
What is the payback period for Melannie? What is the accounting rate of return?
Explanation
Verified
Verified
1. The payback period is the time requir...
Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
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