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Compute the accounting rate of return arr

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Reference no: EM132529999

Jackson Company invests $40,000 in a new piece of equipment. The equipment is expected to yield the following amounts per year for the equipment's four-year useful life:

Cash revenues                                       $70,000

Cash expenses                                       (45,000)

Depreciation expense (Straight-line)           (10,000)

Net Income                                              $15,000

  • Salvage value is zero and the required rate of return is 14%.

Question 1: Calculate the payback period (round your answer to two decimals):

Question 2: Using original investment, compute the accounting rate of return ARR (round your answer to two decimals)

Question 3: Compute the NPV (net present value) of this investment in equipment. Use present values table on next page. Show your work.

Reference no: EM132529999

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