Question

a. Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $120,000. It will have a useful life of 4 years and no salvage value.
Annual revenues would increase by $80,000, and annual expenses (excluding depreciation) would increase by $41,000. Wayne uses the straight-line method to compute depreciation expense. The company’s required rate of return is 12%. Compute the annual rate of return.
b. Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $140,000. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,000, and annual cash outflows would increase by $40,000. Compute the cash payback period.



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  • CreatedMarch 02, 2015
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