Question

Required intormation Use the following information for the Quick Study below. The following information applies to the questions displayed below.J Peng Company is considering an investment expected to generate an average net income after taxes of $2,800 for three years. The investment costs $59,400 and has an estimated $7,200 salvage value. QS 25-7 Computation of accounting rate of return LO P2 Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. Answer is complete but not entirely correct. Accounting Rate of Return Choose Denominator: Choose Numerator: Annual after-tax net income Accounting Rate of Return , Annual average Accounting rate of return investment 17,500X S 33,300 52.55 |%

Answer 1

Q25-7

Ans:

Choose Numerator	Choose Denominator	Accounting Rate of Return
Annual after tax net Income	Annual Average Investment	Accounting Rate of Return
$2800	$33,300	8.41%

Accounting Rate of Return = Annual after tax net income / Annual Average Investment

...........................................= $2,800 / [($59,400 + $7,200) / 2]

...........................................= $2,800 / $33,300

...........................................= 8.408%=8.41% (if Rounded Off)

Note: As HOMEWORKLIB RULES Rules ,we have to answer one question at a time..Thank You

25-8) Ans:

Cash Flow	Select chart	Amount	PV Factor	Present Value
Annual Cash Flow	$2800+(59,400-7200/3)	$20200	2.2832	$46,121
Residual Value		$7200	0.6575	$4734
	Present Value of cash Inflows			$50855
	Present Value of Cash Outflows			($59400)
	Net Present Value			($8545)