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