George Is Considering the Following Investment Proposal Required: Determine the Following Values:
A

George is considering the following investment proposal:
$$\begin{array} { lr } \text{Initial investment:} \\\text{Depreciable assets (straight-line)} & \$7,500 \\\text{Working capital} & 5,000 \\\text{Operations (per year for 4 years):} \\\text{Cash receipts} & \$10,000 \\\text{Cash expenditures} & 6,000 \\\text{Disinvestment:} \\\text{Salvage value of equipment} & \$1,000 \\\text{Recovery of working capital} & 2,500 \\\text{Discount rate} & \text{8 percent }\end{array}$$
$$\begin{array} { c c } \underline{ \text { Period }} & \underline{\text { Present Value Factor }} \\1 & 0.92593 \\2 & 0.85734 \\3 & 0.79383 \\4 & 0.73503\end{array}$$ Required: Determine the following values:
a. Payback period
b. Accounting rate of return on average investment
c. Net present value