Question - An anticipated purchase of equipment for $400,000, with a useful life of 8 years and no residual value, is expected to yield the following annual net incomes and net cash flows:
|
Year
|
Net Income
|
Net Cash Flow
|
|
1
|
$60,000
|
$110,000
|
|
2
|
50,000
|
100,000
|
|
3
|
50,000
|
100,000
|
|
4
|
40,000
|
90,000
|
|
5
|
40,000
|
90,000
|
|
6
|
40,000
|
90,000
|
|
7
|
40,000
|
90,000
|
|
8
|
40,000
|
90,000
|
What is the cash payback period? What is the average or accounting rate of return?