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 $192,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 76,800 units of the equipments product each year. The expected annual income related to this equipment follows. Sales $ 120,000 Costs Materials, labor, and overhead (except depreciation on new equipment) 64,000 Depreciation on new equipment 16,000 Selling and administrative expenses 12,000 Total costs and expenses 92,000 Pretax income 28,000 Income taxes (40%) 11,200 Net income $ 16,800 1. Compute the payback period. 2. Compute the accounting rate of return for this equipment.

Compute the 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
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