1.00 points Harwell Printing Co. is considering the purchase of new electronic p

Question

1.00 points Harwell Printing Co. is considering the purchase of new electronic printing equipment. It would allow Harwell to increase its net income by $44,640 per year. Other information about this proposed project follows: $240,000 Initial investment Useful life Salvage value 4 years $96,000 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.) nting Rate of Return 2. Calculate the payback period for Harwell. (Round your answer to 2 decimal places.) Period Years

Explanation / Answer

Accounting rate of return = Net income*100/initial investment

= 44640*100/240000

Accounting rate of return = 18.6%

Payback period = Initial investment/annual cash flow

Annual cash flow = (240000-96000/4)+44640 = 80640

Payback period = 240000/80640 = 2.98 years

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