Payback and ARR

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

Required:

1. Brad Blaylock has purchased a tractor for $97,500. He expects to receive a net cash flow of $32,000 per year from the investment. What is the payback period for Jim? Round your answer to two decimal places. _______ years

2. Bertha Lafferty invested $372,500 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 $105,000 per year. What is the accounting rate of return? Enter your answer as a whole percentage value (for example, 16% should be entered as "16" in the answer box). ______

3. Melannie Bayless has purchased a business building for $325,000. She expects to receive the following cash flows over a 10-year period:

Year 1: $46,000

Year 2: $59,500

Year 3-10: $86,400

What is the payback period for Melannie? Round your answer to one decimal place. ______

What is the accounting rate of return? Enter your answer as a whole percentage value (for example, 16% should be entered as "16" in the answer box). _______