Chapter 12

Compute the simple rate of return for the machine. Level: Easy LO: 3,4 . Ans: (a.) The payback period is computed as follows: Payback period = Investment required ÷ Net annual cash flow = $462,000 ÷ $115,500 = 4.00 years (b.) The simple rate of return is computed as follows: Simple rate of return = (Annual cost savings - Annual depreciation) ................
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