Each of the following scenarios is independent. All cash flows are after-tax cash flows.
Required:
1. Brad Blaylock has purchased a tractor for $90,000. He expects to receive a net cash flow of $32,500 per year from the investment. What is the payback period for Jim? Round your answer to two decimal places. _____years
2. Bertha Lafferty invested $382,500 in a laundromat. The facility has a 10-year life expectancy with no expected salvage value. The laundromat will produce a net cash flow of $100,000 per year. What is the accounting rate of return? Enter your answer as a whole percentage value (for example, 16% should be entered as "16" in the answer box). ___%
3. Melannie Bayless has purchased a business building for $336,000. She expects to receive the following cash flows over a 10-year period:
Year 1: $42,000
Year 2: $57,500
Year 3-10: $89,800
What is the payback period for Melannie? Round your answer to one decimal place. ___years
What is the accounting rate of return? Enter your answer as a whole percentage value (for example, 16% should be entered as "16" in the answer box). _____%