Payback and ARR

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

Required:

1. Michael Kimathi has purchased a tractor for $86,250. He expects to receive a net cash flow of $31,000 per year from the investment. What is the payback period for Michael? Round your answer to two decimal places. __________________________ years

2. Bertha Lafferty invested $350,000 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 $104,000 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 $327,000. She expects to receive the following cash flows over a 10-year period:

Year 1: $46,000Year 2: $55,500Year 3-10: $82,200

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

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). __________________________ %