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

Assignment Help:

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


Related Discussions:- Calculate the payback period and accounting rate of return

Alternative to total overhead variances, Alternative to Total Overhead Vari...

Alternative to Total Overhead Variances There is an easier approach to overhead variances.  In this approach, the overheads are NOT sub-divided into their fixed and variable e

Contemporary Management accounting issue, Hello, I am writing a report ab...

Hello, I am writing a report about a contemporary management accounting issue, and i can''t really seem to understand the guidelines well. What kind of topic can i use to write a

Limitations of budgeting, Limitations of Budgeting 1. Too mush relian...

Limitations of Budgeting 1. Too mush reliance may reason resistance or inflexibility to change. 2. Difficult to set levels of attainment. It may result into too tight budg

Prepare cash budget of a company, Prepare Cash Budget of a Company The...

Prepare Cash Budget of a Company The given information concerned to the proposed budget for a company for the months ending on 31 December 1996. Additional Information

Calculate the equivalent annual cost, A plant is considering the replacemen...

A plant is considering the replacement of a piece of equipment in its materials handling system with a new piece. If the company's cost of capital is 10%. Should the present asset

Costs, discuss stages of accounting for costs

discuss stages of accounting for costs

Elements of cost, Elements of Cost Nearly there are three elements of c...

Elements of Cost Nearly there are three elements of cost - labor, material, and expenses. These are additional divided into indirect and direct material, indirect and direct la

Mathematical derivation of eoq, Mathematical Derivation of EOQ Let cos...

Mathematical Derivation of EOQ Let cost per order is represented via Co. it is the cost incurred every instance one order is placed. Let the economic quantity purchase ever

What is the division''s margin, Eckels Wares is a division of a major corpo...

Eckels Wares is a division of a major corporation. The following data are for the latest year of operations: Sales

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd