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

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

Initial investment$-$depreciable assets $$28,000$

Initial investment$-$working capital $4,000$

Net cash inflows from operations $($per year for $8$ years$)8,000$

Disinvestment$-$depreciable assets $4,000$

Disinvestment$-$working capital $2,000$

For parts b$.$ and c$.,$ round answers to three decimal places, if applicable.

a$.$ Determine the payback period.

Answer $1$

$4$

years

b$.$ Determine the accounting rate of return on initial investment

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