Calculate the payback period and the accounting rate, 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: 3/29/2013 2:40:16 AM | Location : United States







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

Write discussion on Calculate the payback period and the accounting rate
Your posts are moderated
Related Questions
Multiple Versus Single Overhead Rates, Activity Drivers Deoro Company has identified the following overhead activities, costs, and activity drivers for the coming year: Deoro p

Limitations of abc analysis

Capital We have seen previous in this section that the fundamental accounting equality states as: Assets = liabilities + owners equity. From the illustration of balanc

Jones Company operates within a monopolistically competitive industry. The estimated demand for its products is given by the following inverse demand function P = 1760 - 12Q

Prepare a properly classified Cash Flow Statement for Sports Enterprises Ltd for the year ended 31st December 2011. Note that the Closing Cash at Bank Balance at 31st December 2011

Determine Equivalent Units of the Product Let assume there are 4,000 units of a product in ending inventory out of that 60 percent are fully complete whereas the remaining are

The file A1Q1 contains data for the percentage change in the price of 50 shares selected at random from the Australian Stock Exchange. The data refer to the percentage change in th

Smart Ltd ha sa unit selling price of $500 variable costs per unit of $325 and fixed costs of $140 000. Calculate the break even point in units using (a) a mathematical equations a

Motivation - Behavioural Aspects of Standards Variance analysis and standards setting requires to be carried out like it motivates managers and other employees. It should not

Goal Congruence - Behavioural Aspects of Standards A perfect variance analysis and standard costing system must enhance goal congruence between as: i. The goal of individua