Rego and Associates plans to invest $1,200,000 in modernizing their call centers. They expect productivity to increase

Question:

Rego and Associates plans to invest $1,200,000 in modernizing their call centers. They expect productivity to increase and generate 8,000 more billable hours annually. The current bill rate is $50 per hour. The effect of the investment on productivity will last for over five years, although the effects become harder to predict for beyond five years. The company uses a discount factor of 10% on its capital projects.

Required:

a. What is the payback period on this project?

b. What is the modified payback period on this project?

c. What is the project’s accounting rate of return? Ignore taxes.

Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...