Answer:
1. Accounting rate of return = Annual Net Income / Initial Investment = $38,915 / $215,000 = 18.1%
2. Payback period = Initial Investment / Annual Net Cash Flow = $215,000 / $69,915 = 3.08 years
Working:
Depreciation = (Initial investment - salvage value) / 3 years = ($215,000 - $91,000) / 4 = $31,000
Annual Net Cash Flow = Net income + Depreciation = $38,915 + $31,000 = $69,915
Harwell Printing Co. is considering the purchase of new electronic printing equipment. It would allow Harwell...
Harwell Printing Co. is considering the purchase of new electronic printing equipment. It would allow Harwell to increase its net income by $91,756 per year. Other information about this proposed project follows: Initial investment Useful life Salvage value $452,000 7 years $109,000 Assume straight line depreciation method is used. Required: 1. Calculate the accounting rate of return for Harwell. (Round your percentage answer to 1 decimal place.) Accounting Rate of Return 2. Calculate the payback period for Harwell. (Round your...
Harwell Printing Co. is considering the purchase of new electronic printing equipment. It would allow Harwell to increase its net income by $52,734 per year. Other information about this proposed project follows: Initial Investment 282,000 Useful Life 5 years Salvage Value 97,000 Assume straight line depreciation method is used. Required: 1. Calculate the accounting rate of return for Harwell. (Round your percentage answer to 1 decimal place.) 2. Calculate the payback period for Harwell. (Round your answer to 2 decimal...
Harwell Printing Co. is considering the purchase of new
electronic printing equipment. It would allow Harwell to increase
its net income by $61,288 per year. Other information about this
proposed project follows:
Initial investment
$
326,000
Useful life
6
years
Salvage value
$
98,000
Assume straight line depreciation method is used.
Required: Accounting Rate of Return 2. Calculate the payback period for Harwell. (Round your answer to 2 decimal places.) Payback Period Years
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B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equi pment is expected to cost $192,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 76,800 units of the equipment's product each year. The expected annual income related to this equipment follows. $120,000 Sales Costs Materials, labor, and overhead (except depreciation on new equipment) Depreciation...
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