Required Informatlon Use the following information for the Quick Study below The

Question

Required Informatlon Use the following information for the Quick Study below The tollowing information applies to the questions displayed below Project A requires a $440.000 initial investment for new machinery with a five year life and a salvage value of $40.000 The company uses straight-line depreciation Project A is expected to yield annual net income of $23,500 per year for the next five years. QS 11-5 Payback perlod LO P1 Compute Project A's payback period Choose Numerator: Choose Denominator: P Payback Period Cost of investment cash fow -| Payback period 440,000 Required Information Use the following information for the Quick Study below. The following information applies to the questions displayed below Project A requires $440.000 initial investment for new machinery with a five-year life and a salvage value of $40.000. The company uses straight-line depreciation. Project A is expected to yield annual net income of $23,500 per year for the next five years. as 11-6 Accounting rete of return LO P2 Compute Project A's accounting rate of return Accounting Rate of Return Choose Numerator: Accounting Rate of Return Accounting rate of reburn Choose Denominator:

Explanation / Answer

a) Payback period :

a) Accounting rate of return

Note : Accounting rate of return is calculated on average investment (440000+40000/5) = 240000

Payback period Choose numerator / Choose denominator = Payback period Initial investment / annual cash flow = Payback period 440000 / 103500 = 4.25 years

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