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Calculate Payback Period, Return on Average Investment, NPV

The problem is attached in the file titled "Problem".. It consists of 2 parts, 1st part is calculations and the 2nd part is a short response.

The file titled "Tables" consists of two tables which have to be used, when needed, to help calculate part 1 of the problem. This is the only method that can be used with calculations, any other method may give rounding errors.

See the attached files.

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Solution Preview

See attached file for format and formulas.

Part 1

A Payback period

Initial cost $109,000
Net annual cash flows $17,700

Payback period = Initial cost
Net annual cash flows

$109,000
$17,700

6.16 years

B Return on average investment

Annual net income $8,835

Initial cost of truck $109,000
Salvage value of truck $20,350
Average investment in truck $64,675

Return on average investment = Annual net income
Average investment in truck

$8,835
$64,675

13.66%

C Net present ...

Solution Summary

The solution calculates payback periods, returns on average investments and NPV is examined.

$2.19