Adria Lopez is considering the purchase of equipment for Success Systems that would allow the company to add a new product to its computer furniture line. The equipment is expected to cost $300,000 and to have a six-year life and no salvage value. It will be depreciated on a straight-line basis. Success Systems expects to sell 100 units of the equipment’s product each year. The expected annual income related to this equipment follows

Required Compute the (1) payback period and (2) accounting rate of return for this equipment. (Record answers as percents, rounded to one decimal.)

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Sales... $375,000 Costs Materials, labor, and overhead (except depreciation)... 200,000 Depreciation on new equipment 50,000 Selling and administrative expenses 37,500 Total costs and expenses 287,500 Pretax income Income taxes (30%). Net income.. 87,500 26,250 $ 61,250