# Question

Each of the following scenarios is independent. All cash flows are after-tax cash flows.

Required:

1. Brad Blaylock has purchased a tractor for $93,750. He expects to receive a net cash flow of $31,250 per year from the investment. What is the payback period for Jim?

2. Bertha Lafferty invested $360,000 in a laundromat. The facility has a 10-year life expectancy with no expected salvage value. The laundromat will produce a net cash flow of $108,000 per year. What is the accounting rate of return?

3. Melannie Bayless has purchased a business building for $336,000. She expects to receive the following cash flows over a 10-year period:

Year 1: $42,000

Year 2: $58,800

Years 3–10: $84,000

What is the payback period for Melannie? What is the accounting rate of return?

Required:

1. Brad Blaylock has purchased a tractor for $93,750. He expects to receive a net cash flow of $31,250 per year from the investment. What is the payback period for Jim?

2. Bertha Lafferty invested $360,000 in a laundromat. The facility has a 10-year life expectancy with no expected salvage value. The laundromat will produce a net cash flow of $108,000 per year. What is the accounting rate of return?

3. Melannie Bayless has purchased a business building for $336,000. She expects to receive the following cash flows over a 10-year period:

Year 1: $42,000

Year 2: $58,800

Years 3–10: $84,000

What is the payback period for Melannie? What is the accounting rate of return?

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