Check my work 2 B2B Co. is considering the purchase of equipment that would allo

Question

Check my work 2 B2B 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 $120,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 48,000 units of the equipment's product each year. The expected annual income related to this equipment follows. 1.66 points Sales Costs S 75,000 Materials, labor, and overhead (except depreciation on new equipment) eBook Hint Print References 40,000 10,000 7,500 57,500 17,500 7,000 10,500 Depreciation on new equipment Selling and administrative expenses Total costs and expenses Pretax income Income taxes (40%) Net income 1. Compute the payback period. 2. Compute the accounting rate of return for this equipment. Complete this question by entering your answers in the tabs below Required 1 Required 2 Compute the payback period

Explanation / Answer

1) Payback period :

2) Accounting rate of return

Choose numerator / Choose denominator = Payback period Initial investment / Annual cash flow = Payback period 120000 / 20500 = 5.85 Years

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