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	$	376,000
Costs
Materials, labor, and overhead (except depreciation)		196,000
Depreciation on new equipment		55,000
Selling and administrative expenses		36,500
Total costs and expenses		287,500
Pretax income		88,500
Income taxes (30%)		26,550
Net income	$	61,950

Required: (1) Compute the payback period.

Payback Period Choose Numerator: Choose Denominator: Payback Period Payback period (2) 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