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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 $264,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 105,600 units of the equipment's product each year. The expected annual income related to this equipment follows. $ 165,000 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 (30%) Net income 88,000 22,000 16,500 126,500 38,500 11,550 $ 26,950 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 Choose Denominator: Choose Numerator: Payback Period Payback period 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 $264,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 105,600 units of the equipment's product each year. The expected annual income related to this equipment follows. $ 165,000 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 (30%) Net income 88,000 22,000 16,500 126,500 38,500 11,550 $ 26,950 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 accounting rate of return for this equipment. Accounting Rate of Return Choose Denominator: Choose Numerator: = = Accounting Rate of Return Accounting rate of return
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