Wrigleys Wrecker Service is considering the purchase of a specialized tow truck for its small fleet. This new piece of equipment will cost $100,000 and should be serviceable for 10 years, with an expected residual value of $20,000 at the end of its service life. Wrigleys believes this specialized tow truck will grow some new business by enabling the company to respond to extra heavy duty towing jobs on the nearby interstate highway, and its estimated this will add another $40,000 to annual net cash flow. The table below summarizes the pertinent data supporting the analysis for this acquisition. Investment in new tow truck $ 100,000 Useful life 10 years Estimated annual net cash inflows for next 10 years $ 40,000 Residual value of equipment $ 20,000 Depreciation method straight-line Required rate of return 10% Part

A. Calculate the payback period for this investment.

Part B. Calculate the accounting rate of return for this investment.