o Verizon LTE 9:18 PM ezto.mheducation.com 12:30-1:40 instructions help 10.00 po

Question

o Verizon LTE 9:18 PM ezto.mheducation.com 12:30-1:40 instructions help 10.00 point Bartlett Car Wash Co. is considering the purchase of a new facility. It would allow Bartlett to increase its net income by $98,450 per year. Other information about this proposed project follows: years 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.) Check my work

Explanation / Answer

Accounting rate of return = Average accounting profit / Aveage investment

Depreciation = ($475606 - $64000)/9 years

= $45734

Accounting rate of return = $98450 - $45734 / $475606

= 11.08%.

Payback period :

Year Cash flows Cummulative cash flows

1 $144184 $144184

2 $144184 $288368

3 $144184 $432552

4 $144184 $576736

5 $144184 $720920

6 $144184 $865104

7 $144184 $1009288

8 $144184 $1153472

9 $144184 $1297656

Payback period = 3 + $43054 / $144184

= 3.30 years.

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