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

Question:

Bartlett Car Wash Co. is considering the purchase of a new facility. It would allow Bartlett to increase its net income by $53,000 per year. Other information about this proposed project follows:

Initial investment .....$510,000

Useful life .......... 8 years

Salvage value .......... $ 50,000

Required:

Calculate and evaluate the following for Bartlett:

1. Accounting rate of return.

2. Payback period.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...