Pam's Company estimates the following cash flows and depreciation on a project that will cost $200,000 and will last 10 years with no salvage value:   Sales revenue            $80,000    Salary expense                                            $32,000 Depreciation expense                                    20,000 Miscellaneous expenses                                  8,000                    Net Income                                                  $20,000                                                                           Instructions (a)    Calculate the expected annual rate of return on this project showing calculations to support your answer.   (b)   Calculate the cash payback on this project showing calculations to support your answer.

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 22E
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Pam's Company estimates the following cash flows and depreciation on a project that will cost $200,000 and will last 10 years with no salvage value:

 

Sales revenue            $80,000   

Salary expense                                            $32,000

Depreciation expense                                    20,000

Miscellaneous expenses                                  8,000                   

Net Income                                                  $20,000                                                                          

Instructions

(a)    Calculate the expected annual rate of return on this project showing calculations to support your answer.

 

(b)   Calculate the cash payback on this project showing calculations to support your answer.

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