Reference no: EM131658950

Question: a. Find the accounting return on investment for a project that costs $10,000, will have no salvage value, and has expected annual after tax profits each year of $1,000.

b. Determine the payback period for a capital investment that costs $40,000 and has that following after-tax profits. (The projected outlay of $40,000 will be depreciated on a straight-line basis over 7 years to a zero salvage value.)

Year             After-Tax Profits

1                     $4,000

2                      5,000

3                      6,000

4                      6,500

5                      6,500

6                      6,000

7                      5,000