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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 $264,000
B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $264,000 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 | $ 165,000 |
---|---|
Expenses | |
Materials, labor, and overhead (except depreciation) | 88,000 |
DepreciationEquipment | 22,000 |
Selling, general, and administrative expenses | 16,500 |
Income | $ 38,500 |
(a) Compute the annual net cash flow. (b) Compute the payback period. (c) Compute the accounting rate of return for this equipment.
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