Baird Rentals can purchase a van that costs $110,000; it has an expected useful life of five years and no salvage value. Baird usesstraight-line depreciation. Expected revenue is $40,425 per year. Assume that depreciation is the only expense associated with thisInvestment.Requireda. Determine the payback period.Note: Round your answer to 1 decimal place.b. Determine the unadjusted rate of return based on the average cost of the investment.Note: Round your answer to 1 decimal place. (l.e., .234 should be entered as 23.4).a. Payback periodb. Unadjusted rate of returnyears%

Payback period= Purchase cost / Expected revenue per year

Answered: Baird Rentals can purchase a van that…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Stuart Rentals can purchase a van that costs $105,000; it has an expected useful life of three years and no salvage value. Stuart uses straight-line depreciation. Expected revenue is $52,220 per year. Assume that depreciation is the only expense associated with this investment. Required a. 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. (i.e., .234 should be entered as 23.4).) a. Payback period years b. Unadjusted rate of return %
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