Question
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
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 Annual cost savings that will be provided by the equipment $ 494,000 $ 95,000 10 years Life of the equipment Required: 1a. 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? 2a. Compute the simple rate of return on the equipment. Use straight-line depreciation based on the equipment's useful life. 2b. Would the equipment be purchased if the company's required rate of return is 14%? Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1A 418 20 Reg 25 Compute the payback period for the equipment. (Round your answer to 1 decimal place.) Payback Perod Years Reg18 >
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