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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

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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 $360,000 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 equipment's product each year. The expected annual income related to this equipment follows $ 383,000 Sales Costs Materials, labor, and overhead (except depreciation) Depreciation on new equipment Selling and administrative expenses Total costs and expenses Pretax income Income taxes (40%) Net Income 199,000 60,000 +32,000 291,000 92,000 36,800 $ 55,200 Required: (1) Compute the payback period Payback Period Choose Numerator: Cost of investment $ 360,000 Payback Period Choose Denominator: Annual net cash flow $ 115,200 Payback period 3.1 years (2) Compute the accounting rate of return for this equipment Accounting Rate of Return Choose Denominator Choose Numerator: . Accounting Rate of Return Accounting rate of return

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