i safari File Edit View History Bookmarks Window Help 68

i safari File Edit View History Bookmarks Window Help ? ? , 68% L\' ? E )) Sat Jun 30 5:09 PM Alex C ezto.mheducation.com Home - alamo.edu Chapter 11 Exercises 2. 1 11.11 points Bartlett Car Wash Co. is considering the purchase of a new facility. It would allow Bartett to increase its net income by $68,788 per year. Other information about this proposed project follows: $329,130 Initial investment Useful life Salvage value 6 years $ 48,000 Assume straight line depreciation method is used 1. Calculate the accounting rate of return for Bartlett. (Round your percentage answer to 2 decimal places.) Rate of Return 2. Calculate the payback period for Bartlett. (Round your answer to 2 decimal places.) Payback Period years Hints References eBook &Resources; Hint #1 afari.dmg 0

Solution

1) Accounting rate of return = Average net income*100/Average investment

Average investment = (329130+48000/2) = 188565

Accounting rate of return = 68788*100/188565 = 36.48%

2) Annual cash flow = (329130-48000/6) = 46855+68788 = 115643

Payback period = 329130/115643 = 2.85 Years