1. 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 $92,500. He expects to receive a net cash flow of $30,250 per year from the investment. What is the payback period for Jim? Round your answer to two decimal places. years

   2. Bertha Lafferty invested $385,000 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 $103,000 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 $336,000. She expects to receive the following cash flows over a 10-year period:

   Year 1: $42,500

   Year 2: $56,000

   Year 3-10: $86,400

   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). %

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