Sarah's Popcorn Inc acquired a delivery van to help it transition to online sales. The van had a purchase price of $82,000. The van has a 12-year useful life and an estimated salvage value of $4,000. Decal and custom paint cost $4,250, and freight charges were $1,750. The annual license fee and insurance for the van cost the company a total of $3, Colonel's uses straight-line depreciation. Sarah estimates that the van will enable the company to 300 extra bags of popcorn per month. Each bag sells for $12. The cost of a ba of popcorn is $4, and the labor cost to make a bag of popcorn is $1.50. Required a. Compute the payback period for the new van. b. Compute the annual rate of return for the new van
Sarah's Popcorn Inc acquired a delivery van to help it transition to online sales. The van had a purchase price of $82,000. The van has a 12-year useful life and an estimated salvage value of $4,000. Decal and custom paint cost $4,250, and freight charges were $1,750. The annual license fee and insurance for the van cost the company a total of $3, Colonel's uses straight-line depreciation. Sarah estimates that the van will enable the company to 300 extra bags of popcorn per month. Each bag sells for $12. The cost of a ba of popcorn is $4, and the labor cost to make a bag of popcorn is $1.50. Required a. Compute the payback period for the new van. b. Compute the annual rate of return for the new van
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
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Transcribed Image Text:Sarah's Popcorn Inc acquired a delivery van to help it transition to online sales. The van had a purchase price of $82,000. The van has a 12-year useful life and an estimated
salvage value of $4,000. Decal and custom paint cost $4,250, and freight charges were $1,750. The annual license fee and insurance for the van cost the company a total of $3,120.
Colonel's uses straight-line depreciation. Sarah estimates that the van will enable the company to 300 extra bags of popcorn per month. Each bag sells for $12. The cost of a bag
of popcorn is $4, and the labor cost to make a bag of popcorn is $1.50.
Required
a. Compute the payback period for the new van.
b. Compute the annual rate of return for the new van
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