B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $312,000 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	$ 195,000
Expenses
Materials, labor, and overhead (except depreciation)	104,000
DepreciationEquipment	26,000
Selling, general, and administrative expenses	19,500
Income	$ 45,500

(a) Compute the annual net cash flow. (b) Compute the payback period. (c) Compute the accounting rate of return for this equipment.

• Required A
• Required B
• Required C

Compute the annual net cash flow.

Annual Net Cash Flow
Net cash flow

Compute the payback period.

Payback Period
Numerator:	/	Denominator:
	/		=	Payback period
			=

• Required C

Compute the accounting rate of return for this equipment.

Accounting Rate of Return
Numerator:	/	Denominator:
	/		=	Accounting rate of return