Question: A company wishes to purchase a vehicle for $25,199. The useful life of this vehicle will be three years. The company estimates that the net profit before depreciation for each of the years 1-3 will be 8,900, 8,600, and 7,850 respectively. The company then plans to sell the vehicle for an estimated $5,200.
a. Find the accounting rate of return for the investment in this vehicle.
b. What is the payback period for this vehicle, to the nearest one-hundredth of a year?
c. Calculate the net present value for this investment if the discount rate is 6.25%.
d. To the nearest whole percentage, what is the internal rate of return with the same discount rate?
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