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Compute the accounting rate of return

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Reference no: EM132510443

Bryant Company has obtained the following data about a possible planned investment:

Cost $155,000

Terminal salvage value in 10 years $5,000

Annual cash operating savings for 10 years (end of year) $25,000

Estimated useful life in years 10

Minimum desired rate of return 8%

  • The company uses straight-line depreciation method for financial reporting. Ignore income taxes. The cash operating savings of $25,000 do not include depreciation expense.

Required:

Question A) Compute the net present value of the investment.

Question B) Compute the payback period.

Question C) Compute the accounting rate of return using the initial required investment.

Reference no: EM132510443

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