Arvada Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The e

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Arvada Co Is Considering The Purchase Of Equipment That Would Allow The Company To Add A New Product To Its Line The E 1 (22.34 KiB) Viewed 56 times

Arvada Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $96,000 with a 12-year life and no salvage value. It will be depreciated on a straight line basis. The company expects to sell 38.400 units of the equipment's product each year. The expected annual income related to this equipment follows $ 60,000 Sales Costs Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Selling and administrative expenses Total costs and expenses Pretax incon Income taxes (40%) Net Income 32,000 8,000 6.00 46,000 14,000 5.60 8,400 $ 1. Compute the payback period 2. Compute the accounting rate of return for this equipment