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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 $480,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 192,000 units of the equipments product each year. The expected annual income related to this equipment follows.

Sales	$	300,000
Costs
Materials, labor, and overhead (except depreciation on new equipment)		160,000
Depreciation on new equipment		40,000
Selling and administrative expenses		30,000
Total costs and expenses		230,000
Pretax income		70,000
Income taxes (20%)		14,000
Net income	$	56,000

1. Compute the payback period. 2. Compute the accounting rate of return for this equipment.

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 $384,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 153,600 units of the equipments product each year. The expected annual income related to this equipment follows.

Sales	$	240,000
Costs
Materials, labor, and overhead (except depreciation on new equipment)		84,000
Depreciation on new equipment		32,000
Selling and administrative expenses		24,000
Total costs and expenses		140,000
Pretax income		100,000
Income taxes (30%)		30,000
Net income	$	70,000

If at least an 8% return on this investment must be earned, compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Required 1 Required 2 Compute the payback period Payback Period Choose Numerator: Choose Denominator : Payback Period Payback period Required 1 Required 2 Compute the accounting rate of return for this equipment. Accounting Rate of Return Choose Denominator: Choose Numerator: Accounting Rate of Return -Accounting rate of return Chart Values are Based on: Select Chart Amount X PV FactorPresent Value Net present value