M11-5 (Algo) Calculating Accounting Rate of Return, Payback Period [LO 11-1, 11-2]
Blue Marlin Company is considering the purchase of new equipment for its factory. It will cost $241,000 and have a $48,200 salvage value in five years. The annual net income from the equipment is expected to be $26,510, and depreciation is $38,560 per year.
Calculate Blue Marlin’s accounting rate of return and payback period for the equipment. (Do not round intermediate calculations. Round your Payback Period to 2 decimal places.)
* Please explain how to get the ARR! I keep getting the answer wrong.
Homework Answers
| Annual rate of return=Annual net income/Equipment cost = 26510/241000= 11% | |||||||
| Payback period=241000/(26510+38560)= 3.70 years | |||||||
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M11-5 (Algo) Calculating Accounting Rate of Return, Payback Period [LO 11-1, 11-2]
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planning to add a new product to its line. To manufacture this
product, the company needs to buy a new machine at a $720,000 cost
with an expected four-year life and a $44,000 salvage value. All
sales are for cash, and all costs are out-of-pocket, except for
depreciation on the new machine. Additional information includes
the following. (PV of...
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Saved Problem 24-1A Computation of payback period, accounting rate of return, and net present value LO P1, P2, P3 Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $560,000 cost with an expected four-year life and a $28,000 salvage value. All sales are for cash, and all costs are out-of-pocket, except for depreciation on the new machine. Additional information includes the following. (PV...
Problem 24-1A Computation of payback period, accounting rate of
return, and net present value LO P1, P2, P3 Factor Company is
planning to add a new product to its line. To manufacture this
product, the company needs to buy a new machine at a $720,000 cost
with an expected four-year life and a $44,000 salvage value. All
sales are for cash, and all costs are out-of-pocket, except for
depreciation on the new machine. Additional information includes
the following. (PV of...
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