Colchester Company is considering purchasing a new piece of equipment. Relevant information concerning the equipment follows: (Ignore income taxes.)

Purchase cost	$	210,000
Annual cost savings that will be provided by the equipment	$	42,000
Life of the equipment		8 years

Required:

1-a.	Compute the payback period for the equipment. (Round your answer to 1 decimal place.)

1-b.	If the company rejects all proposals with a payback period of more than four years, will the equipment be purchased?
	multiple choice 1 No Yes

2-a.	Compute the simple rate of return on the equipment. Use straight-line depreciation based on the equipments useful life, assuming $0 salvage value. (Round your answer to 1 decimal place.)

2-b.	Will the equipment be purchased if the company's required rate of return is 9%?
	multiple choice 2 No Yes