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  3. a project requires a $2,890,000 initial investment

A project requires a $2,890,000 initial investment for new machinery with a five-year life and...

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Accounting

A project requires a $2,890,000 initial investment for new machinery with a five-year life and a salvage value of $318,000. The project is expected to yield annual income of $216,540 per year and net cash flows of $709,000 per year for the next five years. The projects accounting rate of return is:

Multiple Choice

  • 24.1%.

  • 6.3%.

  • 13.5%.

  • 19.8%.

  • 47.2%.

A new manufacturing machine is expected to cost $277,200, have an eight-year life, and a $30,000 salvage value. The machine will yield an annual income of $35,000. Annual depreciation expense is $31,000 per year. Compute the payback period for the purchase.

Multiple Choice

  • 8.7 years.

  • 3.8 years.

  • 4.2 years.

  • 7.3 years.

  • 5.4 years.

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