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 $220,000 and to have a five-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	$	381,000
Costs
Materials, labor, and overhead (except depreciation)		194,000
Depreciation on new equipment		44,000
Selling and administrative expenses		34,500
Total costs and expenses		272,500
Pretax income		108,500
Income taxes (35%)		37,975
Net income	$	70,525

(1) Compute the payback period.

Payback Period
Choose Numerator:	/	Choose Denominator:	=	Payback Period
	/		=	Payback period
			=	0

Compute the accounting rate of return for this equipment.

Accounting Rate of Return
Choose Numerator:	/	Choose Denominator:	=	Accounting Rate of Return
	/		=	Accounting rate of return
				0