Bartlett Car Wash Co. is considering the purchase of a new facility. It would al

Question

Bartlett Car Wash Co. is considering the purchase of a new facility. It would allow Bartlett to increase its net income by $70,737 per year. Other information about this proposed project follows:

Assume straight line depreciation method is used.    

Required:
1. Calculate the accounting rate of return for Bartlett. (Round your percentage answer to 2 decimal places.)



2. Calculate the payback period for Bartlett. (Round your answer to 2 decimal places.)

Explanation / Answer

Accounting rate of return = Net income*100/Initial Investment

= 70737*100/329010

Accounting rate of return = 21.50%

Payback period = Initial investment/Annual cash flow

Annual cash flow = (329010-48000/6)+70737 = 117572

Payback period = 329010/117572 = 2.80 years

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.