Continuation of E9-31: Compute payback and ARR with no residual value

(Learning Objective 2)

Refer to the Deer Valley Expansion Data Set. Assume that the expansion has zero residual value.

Requirements 1. Will the payback period change? Explain and recalculate if necessary.

2. Will the project’s ARR change? Explain and recalculate if necessary.

3. Assume that Deer Valley screens its potential capital investments using the fol¬ lowing decision criteria:

Will Deer Valley consider this project further or reject it?

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Maximum payback period. Minimum accounting rate of return. five years 10%