Compute the annual rate of return and cash payback period

Reference no: EM13900871

Jenny Durdil Company is considering an investment of $200,000 in new equipment which will be depreciated on a straight-line basis (8-year life, no salvage value). The expected annual revenues and costs of the new product that will be produced from the equipment are:

Sales		$292,000
Less costs and expenses:
Manufacturing costs	S200,000
Equipment depreciation	25,000
Selling and administrative	43,900	268,900
Income before income taxes		23,100
Income tax expense (30%)		6,930
Net income		$ 16,170

Instructions

(a) Compute the annual rate of return.

(b) Compute the cash payback period.

(d) Determine the internal rate of return.

Reference no: EM13900871

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