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Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787 Exercise 1
PAYBACK AND ARR
Each of the following scenarios is independent. All cash flows are after-tax cash flows.
Required:
1. Jim Larsen has purchased a tractor for $125,000. He expects to receive a net cash flow of $31,250 per year from the investment. What is the payback period for Jim?
2. Sam Rutter invested $240,000 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 $72,000 per year. What is the accounting rate of return?
3. Patricia Piel has purchased a business building for $280,000. She expects to receive the following cash flows over a 10-year period: Year 1: $35,000 Year 2: $49,000 Years 3-10: $70,000 What is the payback period for Patricia? What is the accounting rate of return?
Each of the following scenarios is independent. All cash flows are after-tax cash flows.
Required:
1. Jim Larsen has purchased a tractor for $125,000. He expects to receive a net cash flow of $31,250 per year from the investment. What is the payback period for Jim?
2. Sam Rutter invested $240,000 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 $72,000 per year. What is the accounting rate of return?
3. Patricia Piel has purchased a business building for $280,000. She expects to receive the following cash flows over a 10-year period: Year 1: $35,000 Year 2: $49,000 Years 3-10: $70,000 What is the payback period for Patricia? What is the accounting rate of return?
Explanation
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1.
Calculate Payback period:
2.
Cal...
Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
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