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B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected
B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $144,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 57,600 units of the equipment's product each year. The expected annual income related to this equipment follows. $ 90,000 Sales Costs Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Selling and administrative expenses Total costs and expenses Pretax income Income taxes (40%) Net income 48,000 12,000 9,000 69,000 21,000 8,400 $ 12,600 1. Compute the payback period. 2. Compute the accounting rate of return for this equipment. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the payback period. Payback Period 1 Choose Denominator: Choose Numerator: Payback Period - Payback period 1 = Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the accounting rate of return for this equipment. Accounting Rate of Return Choose Denominator: Choose Numerator: 1 Accounting Rate of Return Accounting rate of return
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