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Compute accounting rate of return using initial investment

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Reference no: EM132795782

Strategy Industries is considering the purchase of some equipment. The initial investment will be $75,000. The estimated useful life of the equipment will be 6 years, at which point it will have a zero terminal salvage value. The annual savings in cash operating costs will equal $14,000, and the company has a minimum desired rate of return of 8%.

Problem 1: Compute:

a. Net-present value
b. Payback period
c. Accounting rate of return using initial investment
d. Internal rate of return

Reference no: EM132795782

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