Homework Answers
Solution a:
Payback period = Initial investment / Annual cash inflows = $114,000 / $56,525 = 2.0 years
Solution b:
Annual net income = Annual cash inflows - Depreciation = $56,525 - ($114,000/3) = $18,525
Unadjusted rate of return = Net income / Initial investment = $18,525 / $114,000 = 16.3%
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Exercise 16-15 Computing the payback period and unadjusted rate of return for the same investment opportunity...
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decimal place.)
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Paul Swanson has an opportunity to acquire a franchise from The
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Yogurt Place name. Mr. Swanson has assembled the following
information relating to the franchise:
A suitable location in a large shopping mall can be rented for
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Remodeling and necessary equipment would cost $270,000. The
equipment would have a 15-year life and an $18,000 salvage value.
Straight-line...
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Gibson rentals can purchase a van that costs 144,00
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Vernon Rentals can purchase a van that costs $185,000; it has an
expected useful life of five years and no salvage value. Vernon
uses straight-line depreciation. Expected revenue is $67,155 per
year. Assume that depreciation is the only expense associated with
this investment.
Required
Determine the payback period. (Round your answer to 1
decimal place.)
Determine the unadjusted rate of return based on the
average cost of the investment. (Round your answer to 1
decimal place. (i.e., .234 should be...
Zachary Rentals can purchase a van that costs $156,000; it has an expected useful life of four years and no salvage value. Zachary uses straight-line depreciation. Expected revenue is $64,272 per year. Assume that depreciation is the only expense associated with this investment. Required a. Determine the payback period. (Round your answer to 1 decimal place.) b. Determine the unadjusted rate of return based on the average cost of the investment. (Round your answer to 1 decimal place. (i.e.. .234...
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Check my Work Exercise 16-12 Determining the payback period LO 16-4 Benson Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $18,870,000; it will enable the company to increase its annual cash inflow by $5,100,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $43,240,000; it will enable the...
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Problem 12-19 Simple Rate of Return; Payback Period [LO12-1,
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Paul Swanson has an opportunity to acquire a franchise from The
Yogurt Place, Inc., to dispense frozen yogurt products under The
Yogurt Place name. Mr. Swanson has assembled the following
information relating to the franchise:
A suitable location in a large shopping mall can be rented for
$3,500 per month.
Remodeling and necessary equipment would cost $270,000. The
equipment would have a 15-year life and an $18,000 salvage value.
Straight-line...
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