Betty just graduated from college. Since she is starting her own business, it's time to upgrade from her clunker to a reliable vehicle. Betty has the option to purchase a new car for her business at a cost of $31,832 (life of 7 years with no salvage value), estimating that it would help her bring in additional annual net operating cash flows of $9,200 over the life of the car. Determine the simple payback period and the IRR for this investment. Betty expects her business income to be subject to a 30% tax rate. (Round simple payback period to 3 decimal places, e.g. 15.256 and IRR to 2 decimal places, e.g. 15.25%. Round intermediate calculations to 2 decimal places, e.g. 15.25.) Simple payback period IRR years %

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
Problem 1PS
icon
Related questions
Question

Baghiben 

Betty just graduated from college. Since she is starting her own business, it's time to upgrade from her clunker to a reliable vehicle.
Betty has the option to purchase a new car for her business at a cost of $31,832 (life of 7 years with no salvage value), estimating that
it would help her bring in additional annual net operating cash flows of $9,200 over the life of the car.
Determine the simple payback period and the IRR for this investment. Betty expects her business income to be subject to a 30% tax
rate. (Round simple payback period to 3 decimal places, e.g. 15.256 and IRR to 2 decimal places, e.g. 15.25%. Round intermediate calculations
to 2 decimal places, e.g. 15.25.)
Simple payback period
IRR
years
%
Transcribed Image Text:Betty just graduated from college. Since she is starting her own business, it's time to upgrade from her clunker to a reliable vehicle. Betty has the option to purchase a new car for her business at a cost of $31,832 (life of 7 years with no salvage value), estimating that it would help her bring in additional annual net operating cash flows of $9,200 over the life of the car. Determine the simple payback period and the IRR for this investment. Betty expects her business income to be subject to a 30% tax rate. (Round simple payback period to 3 decimal places, e.g. 15.256 and IRR to 2 decimal places, e.g. 15.25%. Round intermediate calculations to 2 decimal places, e.g. 15.25.) Simple payback period IRR years %
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
steps

Unlock instant AI solutions

Tap the button
to generate a solution

Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education