Solution-Compute the rate of return on the initial

Compute the rate of return on the initial investment

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Reference no: EM133005787

Question - Bob's Big Burger is considering a proposal to invest in a speaker system that would allow its employees to service drive-through customers. The cost of the system (including installation of special windows and driveway modifications) is 800,000. Jena Simon, manager of Bob's expects the drive through operations to increase annual cash sales by 500,000, with an annual cash expenses of 300,000.

Assume that the system has an economic life of six years, at which time it will have no disposal value.

The required rate of return is 12 percent. Ignore income tax.

Required -

-Compute the payback period. Is this a good measure of profitability?

-Compute the net present value. Should Simon accept the proposal? Why or why not?

-Using the Accounting Rate of Return (ARR) model, compute the rate of return on the initial investment.

Reference no: EM133005787

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Compute the rate of return on the initial investment

Reference no: EM133005787

Reference no: EM133005787

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