Payback Period and Accounting Rate of Return: Equal Annual Operating Cash Flows with Disinvestment

Minn is considering an investment proposal with the following cash flows:

Initial investment-depreciable assets$125,000Net cash inflows from operations (per year for 10 years)25,000Disinvestment-depreciable assets27,000

For parts b. and c., round answers tothree decimal places, if applicable.

a. Determine the payback period.

Answer

yearsb. Determine the accounting rate of return on initial investment.

Answer

c. Determine the accounting rate of return on average investment.

Answer