Dracor Company 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 $280,000 with a 7-year life, no salvage value, and will be depreciated using straight-line depreciation. The expected annual income related to this equipment follows. Compute the (a) payback period and (b) accounting rate of return for this equipment. Sales $900,000 Costs: Manufacturing Depreciation on machine Selling and administrative expenses Income before taxes Income tax (30%) Net income $545,000 40,000 249,000 (834,000) 66,000 (19,800) $46,200