Computing the payback period and unadjusted rate of return for the same investment opportunity Foy Rentals can purchase a van that costs $60,000; it has an expected useful life of three years and no salvage value. Foy uses straight-line depreciation. Expected revenue is $30,000 per year. Assume that depreciation is the only expense associated with this investment.
Required
a. Determine the payback period.
b. Determine the unadjusted rate of return based on the average cost of the investment.