Answer Happy

Santana Rey is considering the purchase of equipment for Business Solutions that would allow the company to add a new product to its computer furniture line. The equipment is expected to cost $312,000 and to have a six-year life and no salvage value. It will be depreciated on a straight-line basis Business Solutions expects to sell 100 units of the equipment's product each year. The expected annual income related to this equipment follows. $ 382,000 55 Sales Costs Materials, labor, and overhead (except depreciation) Depreciation on new equipment Selling and administrative expenses Total costs and expenses Pretax income Income taxes (35) Net Income 200,000 52,000 33,500 285,500 96,500 33,725 $ 62,725 Required: (1) Compute the payback period Choose Numerator: Payback Period Choose Denominator: Payback Period Payback period
(2) Compute the accounting rate of return for this equipment Choose Numerator: Accounting Rate of Return Choose Denominator: Accounting Rate of Return Accounting rate of return