Fargo Corp. is considering the purchase of a new piece of equipment. The equipment costs $50,100, and will have a salvage value of $5,100 after nine years. Using the new piece of equipment will increase Fargo’s annual cash flows by $6,100. Fargo has a hurdle rate of 13%.

a. How much is Fargo’s annual depreciation will on the equipment?



b. What is Fargo’s projected annual increase in net income?



c. What is the accounting rate of return for purchasing the new piece of equipment? (Round your answer to 2 decimal places.)



d. Based on financial factors, should Fargo purchase the new equipment?

	Yes
	No