Refer to the Walken Hardware information in E12-38B. Compute the ARR for the investment.
In E12-38B. Walken Hardware is adding a new product line that will require an investment of $1,418,000. Managers estimate that this investment will have a 10-year life and generate net cash inflows of $300,000 the first year, $280,000 the second year, and $250,000 each year thereafter for eight years. The investment has no residual value. Compute the payback period.