In the design of a chemical plant, the following costs and revenues (in the third year of production) are projected:
Total depreciable capital, excluding allocated power $10,000,000
Allocated power utility $ 2,000,000
Working capital $ 500,000
Annual sales $ 8,000,000/yr
Annual cost of sales excluding depreciation 1,500,000/yr
Required:
1. Assume the costs of land, royalties, and startup are zero. Determine:
(a) The return on investment (ROI)
(b) The payback period (PBP)