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B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs
B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $360,000 and has a 12-year life and no salvage value. The expected annual income for each year from this equipment follows. Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Equipment Selling, general, and administrative expenses Income (a) Compute the annual net cash flow. (b) Compute the payback period. (c) Compute the accounting rate of return for this equipment. $225,000 120,000 30,000 38,250 $ 36,750 Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the accounting rate of return for this equipment. Numerator: Annual income Accounting Rate of Return Denominator: Average investment 36,750 = Accounting rate of retum 0 < Prev 6 of 8 Next >
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