Question - Rooney Rentals can purchase a van that costs $132,000; it has an expected useful life of four years and no salvage value. Rooney uses straight-line depreciation. Expected revenue is $54,780 per year. Assume that depreciation is the only expense associated with this investment.
Required
a. Determine the payback period.
b. Determine the unadjusted rate of return based on the average cost of the investment.