Norman Rentals can purchase a van that costs $45,000; it has an expected useful life of three

Question:

Norman Rentals can purchase a van that costs $45,000; it has an expected useful life of three years and no . Norman uses straight-line depreciation. Expected revenue is $25,000 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.
Compute the percentage rate to one decimal point.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...