Question: Mimi Company is considering a capital investment of $250,000 in new equipment. The equipment is expected to have a 5-year useful life with no salvage value. Depreciation is computed by the straight-line method. During the life of the investment, annual net income and cash inflows are expected to be $25,000 and $75,000, respectively. Mimi's minimum required rate of return is 10%.
Part (a) Calculate the payback period.
Part (b) Calculate the net present value.
Part (c) Calculate the accounting rate of return.