Martin Company is considering the purchase of 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	$	38,300
Life of the equipment		14 years

Required:

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

Payback period

years

1b.

If the company requires a payback period of 4 years or less, would the equipment be purchased?

	No
	Yes

2a.	Use straight-line depreciation based on the equipment's useful life. Compute the simple rate of return on the equipment. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)

Simple rate of return

%

2b.

Would the equipment be purchased if the company's required rate of return is 12%?

	Yes
	No