1. What is the payback period? Compute the payback period for an investment requiring an initial outlay of $80,000 with expected annual cash inflows of $30,000.
2. Name and discuss three possible reasons that the payback period is used to help make capital investment decisions.
3. What is the accounting rate of return? Compute the ARR for an investment that requires an initial outlay of $300,000 and promises an average net income of $100,000.