A piece of labor$-$saving equipment has just come onto the market that Mitsui Electronics, Limited, could use to reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow:

$16\mathrm{.}66$

points

Purchase cost of the equipment $$494,000$

Annual cost savings that will be

$,$provided by the equipment

Life of the equipment

$$95,000$

$10$ years

Required:

$1$a$.$ Compute the payback period for the equipment.

$1b.$ If the company requires a payback period of four years or less, would the equipment be purchased?

$2$a$.$ Compute the simple rate of return on the equipment. Use straight$-$line depreciation based on the equipment's useful life.

$2$ b$.$ Would the equipment be purchased if the company's required rate of return is $14\%?$

Complete this question by entering your answers in the tabs below.

References

Compute the payback period for the equipment. $($Round your answer to $1$ decimal place.$)$

Payback Period

Years