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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 $432,000 with a 12-year life and no salvage value. It wil be depreciated on a straight-line basis. The company expects to sell 172,800 units of the equipment's product each year. The expected annual income related to this equipment follows. Sales Costs $270,000 Materials, labor, and overhead (except depreciation on new equipment) 144,000 36,000 Depreciation on new equipment Selling and administrative expenses Total costs and expenses Pretax income 27,000 207,000 63,000 Income taxes (50%) 31,500 Net income $ 31,500 1. Compute the payback period. Payback Period Choose Numerator: Choose Denominator: Payback Period Payback period
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