I need help with this homework, can someone please help me solve and understand ? Wrigley’s Wrecker

Service is considering the purchase of a specialized tow truck for its small fleet. This new piece of equipment will cost $100,000 and should be serviceable for 10 years, with an expected residual value of $20,000 at the end of its service life. Wrigley’s believes this specialized tow truck will grow some new business by enabling the company to respond to extra heavy duty towing jobs on the nearby interstate highway, and it’s estimated this will add another $40,000 to annual net cash flow. The table below summarizes the pertinent data supporting the analysis for this acquisition.


Investment in new tow truck$ 100,000
Useful life10 years
Estimated annual net
cash inflows for next 10 years$ 40,000
Residual value of equipment$ 20,000
Depreciation methodstraight-line
Required rate of return10%


Part A. Calculate the payback period for this investment.





Part B. Calculate the accounting rate of return for this investment.








Question 2. Wally White is considering the purchase of a new automatic car wash system that could be installed on an open, unused section of the parking lot of his drug store business. The new system will cost $40,000, and with an 8-year useful life will have an estimated residual value of $10,000. It’s also estimated that this car wash unit will generate net cash inflows of $12,000 per year over its 8-year life. If White requires a 10% return on his money, what is the net present value (NPV) of this project?







Question 3. Polaris Manufacturing is evaluating an investment in a new drilling machine that would cost $48,000. Polaris estimates that it will realize $12,000 in annual net cash inflows for each year of the machine’s 6-year useful life. What is the internal rate of return (IRR) for this proposed investment? You may use Excel or also feel free to approximate this answer using present value tables.



 ATTACHMENT PREVIEW Download attachmentACCT346 Week 7 Homework AssignmentQues±on 1.Wrigley’s Wrecker Service is considering the purchase of a specialized tow truck for its smallFeet. This new piece of equipment will cost $100,000 and should be serviceable for 10 years, with anexpected residual value of $20,000 at the end of its service life. Wrigley’s believes this specialized towtruck will grow some new business by enabling the company to respond to extra heavy duty towing jobson the nearby interstate highway, and it’s es±mated this will add another $40,000 to annual net cashFow. The table below summarizes the per±nent data suppor±ng the analysis for this acquisi±on.Investment in new tow truck$ 100,000Useful life10 yearsEs±mated annual netcash inFows for next 10 years$ 40,000Residual value of equipment$ 20,000Deprecia±on methodstraight-lineRequired rate of return10%Part A.Calculate thepayback periodfor this investment.Part B.Calculate theaccountng raTe of reTurnfor this investment.Ques±on 2.Wally White is considering the purchase of a new automa±c car wash system that could beinstalled on an open, unused sec±on of the parking lot of his drug store business. The new system willcost $40,000, and with an 8-year useful life will have an es±mated residual value of $10,000. It’s alsoes±mated that this car wash unit will generate net cash inFows of $12,000 per year over its 8-year life. IfWhite requires a 10% return on his money, what is the net present value (NPV) of this project?

View the AnswerQueston 3.Polaris Manufacturing is evaluaTng an investment in a new drilling machine that would cost$48,000. Polaris esTmates that it will realize $12,000 in annual net cash inFows for each year of themachine’s 6-year useful life. What is the internal rate of return (IRR) for this proposed investment? Youmay use Excel or also feel free to approximate this answer using present value tables.

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