Each of the following scenarios is independent. All cash flows are after-tax cash flows.

Required:

1. Don Blackburn has purchased a tractor for \($62,500\). He expects to receive a net cash flow of \($15,625\) per year from the investment. What is the payback period for Don?

2. Bill Johnson invested \($600,000\) in a laundromat. The facility has a 10-year life expectancy with no expected salvage value. The laundromat will produce a net cash flow of \($180,000\) per year. What is the accounting rate of return? Use original investment for the computation.

3. Kathleen Shorts has purchased a business building for \($700,000\). She expects to receive the following cash flows over a 10-year period:

Year 1: \($87,500\) Year 2: \($122,500\) Years 3–10: \($175,000\) What is the payback period for Kathleen? What is the accounting rate of return (using average investment and assuming straight-line depreciation over the 10 years)?