Santana Rey is considering the purchase of equipment for Business Solutions that would allow the company to add a new product to its computer furniture line. The equipment is expected to cost $330,000 and to have a six-year life and no salvage value. It will be depreciated on a straight-line basis. Business Solutions expects to sell 100 units of the equipments product each year. The expected annual income related to this equipment follows.

Sales	$	384,000
Costs
Materials, labor, and overhead (except depreciation)		196,000
Depreciation on new equipment		55,000
Selling and administrative expenses		32,000
Total costs and expenses		283,000
Pretax income		101,000
Income taxes (40%)		40,400
Net income	$	60,600

Payback Period
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