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 $102,012 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

1 Accounting Rate of Return =Net income/Initial investment =102012/472280= 21.60% 2 Annual depreciation=(472280-50000)/9= $46920 Payback Period =472280/(102012+46920)= 3.17 years

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