Calculate the payback period and accounting rate of return, Cost Accounting

Freshly Ground Investments have just made an investment of $550 000 in a new Toyota Hilux (with trailer) delivery vehicle. This vehicle will be used for deliveries and generate revenues from such activities. Further details:

Expected useful life 5 years (straight line depreciation)

Salvage value 50 000

Cost of Capital 10 % after tax

Year                            Cash flows

1                              220 000

2                              200 000

3                              120 000

4                              110 000

5                              50 000

Required:

1. Calculate the payback period and the accounting rate of return.

2. Freshly Ground Investments requires a payback period of no more than 3 years and a return of at least 30%. Purely on the basis of these criteria, should this project be accepted. Explain

3. The payback method makes a crucial omission in the calculation, namely the time value of money. Can you complete the above computation using a method that accounts for the time value of money? On the basis of this calculation, should the project be accepted? Explain

Posted Date: 3/19/2013 5:48:24 AM | Location : United States







Related Discussions:- Calculate the payback period and accounting rate of return, Assignment Help, Ask Question on Calculate the payback period and accounting rate of return, Get Answer, Expert's Help, Calculate the payback period and accounting rate of return Discussions

Write discussion on Calculate the payback period and accounting rate of return
Your posts are moderated
Related Questions
Labor Transactions (i) Wages Paid in cash (ii) Wages incurred like a) Direct labor or else b) Indirect labor  In the Financial Books  In

Quantitative and Qualitative Information in Accounting Systems The availability of information is the lifeblood of any type of management and cost accounting system. It is vi

Unrecaptured Sec. 1250 Gain and 1231. Mr. Briggs purchased an apartment complex on January 10, 2011, for $2 million with 10% of the price allocated to land. He sells the complex on

Direct Cost as a Relevant Cost Direct costs may be directly chargeable to a cost center or a product. They may be fixed costs or variable costs whereas it comes to decision-ma

Automotive Products  (AP)  designs, manufactures,  and  sells  automotive  parts.  It  has  3 main operating departments: design, engineering, and production.  1.Design  ñ  the

EARNINGS AFTER TAX-1500000 NUMBER OF EQUITY SHARE OUTSTANDING-300000 DIVIDEND PAID 600000 PRICE-EARNING RATIO-101 RATE OF RETURN ON INVESTMENT-20% WHAT IS OPTIMUM DIVIDEND PAY OUT

Decision Making Cycle Steps in decision-making cycle are as: a) Clearly define the objective that is to be the focus of the decision. This is significant in order that the

Using the  information provided prepare  the four financial  statements  for inclusion in Plantagenet Ltd's Annual Report dated at its balance date of 30th June 2011. The statement

CVP and Computer Applications The broad availability of personal computers encourages more managers to apply cost volume profit analysis. Computers can quickly create the comp

are exploration cost treated as an asset or expense or both?