Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 $ 530,000
Annual cost savings that will be provided by the equipment $ 100,000
Life of the equipment 10 years

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 15%?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting Volume 1

Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod Dick

7th Edition

1260306747, 978-1260306743

More Books

Students also viewed these Accounting questions

Question

=+a) What assumptions and/or conditions are violated by this model?

Answered: 1 week ago

Question

A greater tendency to create winwin situations.

Answered: 1 week ago