22-7Payback period, accounting rate of return on investment Al-Baida wants to buy a new machine with special purposes for an amount (1)One million $ Dollars for the production of a product, and the economic life of the machine is (10) years, bearing in mind that there is no residual value for the machine at the end of its useful life. The company adopts the straight-line method in calculating the depreciation, and it is expected that the annual revenues from operating the machine will be 1,200,000 $ Dollars, and the annual expenses excluding taxes, 700,000 $ Dollars. If you know that the company adopts a discount rate of 12%. The income tax rate is 30% for all years. Required: Calculate the following: 1. The payback period. 2. The rate of accounting return on investment.
22-7Payback period, accounting rate of return on investment Al-Baida wants to buy a new machine with special purposes for an amount (1)One million $ Dollars for the production of a product, and the economic life of the machine is (10) years, bearing in mind that there is no residual value for the machine at the end of its useful life. The company adopts the straight-line method in calculating the depreciation, and it is expected that the annual revenues from operating the machine will be 1,200,000 $ Dollars, and the annual expenses excluding taxes, 700,000 $ Dollars. If you know that the company adopts a discount rate of 12%. The income tax rate is 30% for all years. Required: Calculate the following: 1. The payback period. 2. The rate of accounting return on investment.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:22-7Payback period, accounting rate of return on investment Al-Baida wants to
buy a new machine with special purposes for an amount
(1)One million $ Dollars for the production of a product, and the economic life
of the machine is (10) years, bearing in mind that there is no residual value for
the machine at the end of its useful life. The company adopts the straight-line
method in calculating the depreciation, and it is expected that the annual revenues
from operating the machine will be 1,200,000 $ Dollars, and the annual expenses
excluding taxes, 700,000 $ Dollars. If you know that the company adopts a
discount rate of 12%. The income tax rate is 30% for all years .
Required: Calculate the following:
1. The payback period.
2. The rate of accounting return on investment.
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