Bryant Company has obtained the following data about a possible planned investment:
- Cost $270,000
- Terminal salvage value in 8 years $10,000
- Additional annual revenues for 8 years $250,000
- Additional annual cash expenses for 8 years $200,000
- Estimated useful life in years 8
- Minimum desired rate of return 10%
- Present value of ordinary annuity, 10%, 8 periods 5.3349
- Present value of one, 10%, 8 periods 0.4665
The company uses straight-line depreciation method. Ignore income taxes.
Required:
A) Compute the net present value of the investment.
B) Compute the payback period.
C) Compute the accounting rate of return using the initial required investment.