Managerial Accounting

Colchester Company is considering purchasing a new piece of equipment. Relevant information concerning the equipment follows: (Ignore income taxes.) Purchase cost $225,000 Annual cost savings that will be provided by the equipment $ 45,000 Life of the equipment 10 years Required: 1-a. Compute the payback period for the equipment. (Round your answer to 1 decimal place.) Payback period year(s) 1-b. If the company rejects all proposals with a payback period of more than four years, will the equipment be purchased? O Yes O No2-a. Compute the simple rate of return an the equipment Use straight-line depreciation based on the equipment's useful life. assuming $0 salvage value. [Round your answer to 1 decimal place.) -I 2-b. Will the equipment he purchased if the company's required rate of return is 1295? in) Yes