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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

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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 to cost $360,000 with a 12-year life and no salvage value. It will be Exercise 25-8 Payback period and accounting rate of returndepreciated on a straight-line basis. The company expects to sell 144.000 units of the equipment's product on investment each year. The expected annual income related to this equipment follows. Compute the (1) payback period and (2) accounting rate of return for this equipment. P1 P2 Sales Costs Materials, labor, and overhead (except depreciation on new equipment)...... 120,000 30,000 22,500 172.500 52.500 15.750 36,750 Selling and administrative expenses Pretax income Income taxes (30%) Net income. Check (1) 5.39 years 20 42%

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