O https/fmewconnect.mheducation.com Help Save & Ch Exercise 16-15 Computing the

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O https/fmewconnect.mheducation.com Help Save & Ch Exercise 16-15 Computing the payback period and unadjusted rate of return for the same investment opportunity LO 16-4 Currie Rentals can purchase a van that costs $200.000, it has an expected useful life of five years and no salvage value. Currie uses straight-line depreciation. Expected revenue is $72,300 per year. Assume that depreciation is the only expense associated with this Required o. Determine the payback period. (Round your answer to 1 decimal place.) b. Determine the unadjusted rate of return based on the average cost of the investment (Round your answer to 1 decimal place. .e 234 should be entered as 23.4)) a. Payback period b Unadjusted rale of return

Explanation / Answer

a Payback period = 200000/72300= 2.8 years b Annual profits=72300-(200000/5)= $32300 Average investment = 200000/2=$100000 Unadjusted rate of return = 32300/100000= 32.3%

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