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: Purchase cost of the equipment $ 560,500 Annual cost savings that will be provided by the equipment $ 95,000 Life of the equipment 10 years Required:

2a. Compute the simple rate of return on the equipment. Use straight-line depreciation based on the equipments useful life. 2b. Would the equipment be purchased if the companys required rate of return is 16%?