# Accounting Rate of Return, Payback Period

Waterman Publishing is considering the purchase of a used printing press costing $38,400. The printing press would generate a net cash inflow of $16,000 a year for 3 years. At the end of 3 years, the press would have no salvage value. The company's cost of capital is 10 percent. The company uses straight-line depreciation.

A. The project's accounting rate of return (rounded to the nearest percent) on the initial investment is:

8 percent

10 percent

42 percent

75 percent

B. The company uses straight-line depreciation. The investment's payback period in years (rounded to two decimal points) is:

2.00

2.13

2.40

3.00

https://brainmass.com/business/accounting-rate-of-return/accounting-rate-of-return-payback-period-232069

#### Solution Preview

See attached Excel file.

Waterman Publishing is considering the purchase of a used printing press costing $38,400. The printing press would generate a net cash inflow of $16,000 a year for 3 years. At the end of 3 years, the press would have no salvage value. The company's cost of capital is 10 percent. The company uses straight-line ...

#### Solution Summary

Calculates accounting rate of return and payback period for printing press.