70.2K

Verified Solution

Link Copied!

Exercise 12-13 Payback Period and Simple Rate of Return Computations [LO12-1, LO12-6] A piece of labor-saving equipment has just come onto the market that Mitsui Electronics, Ltd., could use to reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow: $412,500 Purchase cost of the equipment Annual cost savings that will be provided by the equipment $ 75,000 Life of the equipment 10 years Required: 1a. Compute the payback period for the equipment 1b. If the company requires a payback period of four years or less, would the equipment be purchased? 2a. Compute the simple rate of return on the equipment. Use straight-line depreciation based on the equipment's useful life. 2b. Would the equipment be purchased if the company's required rate of return is 12%? Answer is not complete. Complete this question by entering your answers in the tabs below. pon Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1A Req 1B Req 2A Req 28 Compute the payback period for the equipment. (Round your answer to 1 decimal place.) Payback period years Req 1B > Answer is not complete. Complete this question by entering your answers in the tabs below. Rea 2A Req 18 Reg 1A Reg 28 Compute the simple rate of return on the equipment. Use straight-line depreciation based on the equipment's useful life. (Round your answer to 1 decimal place i.e. 0.123 should be considered as 12.3%.) Simple rate of return %

Answer & Explanation Solved by verified expert

See Answer