Carter & Co. are trying to decide which of two investments they should consider. The following information is available:
Each investment is expected to have a useful life of 5 years.
(a) What is the rate of return on average investment of each investment?
(b) What is the payback period of each investment?
$$\begin{array} { l r r }
& \text { Investment } \mathrm { A } & \text { Investment B } \
\text { Cost } & \$ 400,000 & \$ 600,000 \
\text { Salvage value } & \$ 0 & \$ 40,000 \
\text { Annual cash flow } & \$ 104,000 & \$ 160,000
\end{array}$$

Question

Carter & Co. are trying to decide which of two investments they should consider. The following information is available:
Each investment is expected to have a useful life of 5 years.
(a) What is the rate of return on average investment of each investment?
(b) What is the payback period of each investment?
 $$\begin{array} { l r r } 
& \text { Investment } \mathrm { A } & \text { Investment B } \
\text { Cost } & \$ 400,000 & \$ 600,000 \
\text { Salvage value } & \$ 0 & \$ 40,000 \
\text { Annual cash flow } & \$ 104,000 & \$ 160,000
\end{array}$$

Quizplus · Accepted Answer

The Answer of Carter & Co. are trying to decide which of two investments they should consider. The following information is available:
Each investment is expected to have a useful life of 5 years.
(a) What is the rate of return on average investment of each investment?
(b) What is the payback period of each investment?
 $$\begin{array} { l r r } 
& \text { Investment } \mathrm { A } & \text { Investment B } \
\text { Cost } & \$ 400,000 & \$ 600,000 \
\text { Salvage value } & \$ 0 & \$ 40,000 \
\text { Annual cash flow } & \$ 104,000 & \$ 160,000
\end{array}$$