Before you begin this assignment, review the Tying it All Together feature in the chapter. It will also be helpful if you review TravelCenters of America LLC’s 2075 annual report</i> (https://www.sec.gov/Archives/edgar/data/1378453/000137845316000040/a2015123110k.htm). TravelCenters of America LLC is the largest full-service travel center company in the United States, serving both professional drivers and motorists. Since 2011, the company’s growth strategy has been to acquire additional travel center and convenience center locations. In addition to agreements entered into in 2015, the company acquired 3 travel centers and 170 convenience centers for a total purchase price of $320.3 million. Requirements Using the payback method, suppose TravelCenters of America expect to receive an annual net cash inflow of $32.03 million per year. How many years would it take to pay back the initial investment? What are some disadvantages to using the payback method? Why would a company, such as TravelCenters of America, not use the payback method as their sole method for making capital investment decisions?
Before you begin this assignment, review the Tying it All Together feature in the chapter. It will also be helpful if you review TravelCenters of America LLC’s 2075 annual report</i> (https://www.sec.gov/Archives/edgar/data/1378453/000137845316000040/a2015123110k.htm). TravelCenters of America LLC is the largest full-service travel center company in the United States, serving both professional drivers and motorists. Since 2011, the company’s growth strategy has been to acquire additional travel center and convenience center locations. In addition to agreements entered into in 2015, the company acquired 3 travel centers and 170 convenience centers for a total purchase price of $320.3 million. Requirements Using the payback method, suppose TravelCenters of America expect to receive an annual net cash inflow of $32.03 million per year. How many years would it take to pay back the initial investment? What are some disadvantages to using the payback method? Why would a company, such as TravelCenters of America, not use the payback method as their sole method for making capital investment decisions?
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 104.2C
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Question
Before you begin this assignment, review the Tying it All Together feature in the chapter. It will also be helpful if you review TravelCenters of America LLC’s 2075 annual report</i> (https://www.sec.gov/Archives/edgar/data/1378453/000137845316000040/a2015123110k.htm).
TravelCenters of America LLC is the largest full-service travel center company in the United States, serving both professional drivers and motorists. Since 2011, the company’s growth strategy has been to acquire additional travel center and convenience center locations. In addition to agreements entered into in 2015, the company acquired 3 travel centers and 170 convenience centers for a total purchase price of $320.3 million.
Requirements
- Using the payback method, suppose TravelCenters of America expect to receive an annual net
cash inflow of $32.03 million per year. How many years would it take to pay back the initial investment? - What are some disadvantages to using the payback method? Why would a company, such as TravelCenters of America, not use the payback method as their sole method for making capital investment decisions?
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