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14. Dracor Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is
14. Dracor Company 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 $280,000 with a 7-year life, no salvage value, and will be depreciated using straight-line depreciation. The expected annual income related to this equipment follows. Compute the (a payback period and (b accounting rate of return for this equipment. $900,000 Sales Costs: Manufacturing Depreciation on machine $545,000 40,000 Selling and administrative expenses Income before taxes 249,000 (834,000) 66,000 Income tax (30%) Net income 19,800 $ 46,200
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