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A piece of laborsaving equipment has just come onto the market that Mitsui Electronics, Ltd., could use to reduce costs in one of its plants
A piece of laborsaving equipment has just come onto the market that Mitsui Electronics, Ltd., 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: |
1-a. | Compute the payback period for the equipment. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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2-b. | Would the equipment be purchased if the companys required rate of return is 15%? | ||||
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