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 $240,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 96,000 units of the equipments product each year. The expected annual income related to this equipment follows.

Sales	$	150,000
Costs
Materials, labor, and overhead (except depreciation on new equipment)		80,000
Depreciation on new equipment		20,000
Selling and administrative expenses		15,000
Total costs and expenses		115,000
Pretax income		35,000
Income taxes (30%)		10,500
Net income	$	24,500

1. Compute the payback period. 2. Compute the accounting rate of return for this equipment.

Compute the payback period.

Payback Period
Choose Numerator:	/	Choose Denominator:	=	Payback Period
	/		=	Payback period
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Compute the accounting rate of return for this equipment.

Accounting Rate of Return
Choose Numerator:	/	Choose Denominator:	=	Accounting Rate of Return
	/		=	Accounting rate of return