Bartlett car wash co. is considering the purchase of a new facility. it would allow bartlett to increase its net income by $53,000 per year. other information about this proposed project follows: initial investment $ 510,000 useful life 8 years salvage value $ 50,000 assume straight line depreciation method is used. calculate the accounting rate of return for bartlett. %calculate the payback period for bartlett years

Accounting rate of return = 10.39%

Payback period = 4.62 years

Explanation:

The computations are shown below:

For accounting rate of return, it equal to

= Annual net income ÷ Investment

= $53,000 ÷ $510,000

= 10.39%

For payback period, it would be

= Initial investment ÷ Net cash flow

where,  

Initial investment is $263,000

And, the net cash flow = annual net operating income + depreciation expenses

= $53,000 + $57,500

= $110,500

The depreciation expense would be

= (Original cost - residual value) ÷ (useful life)

= ($510,000 - $50,000) ÷ (8 years)

= ($460,000) ÷ (8 years)  

= $57,500

Now put these values to the above formula  

So, the value would equal to

= ($510,000) ÷ ($110,500)

= 4.62 years

1) the stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) the time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) the period of time during which a product can be produced and marketed profitably.

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