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Exercise 25-8 Payback period and accounting rate of returndepreciated on a straight-line basis. The company...

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Exercise 25-8 Payback period and accounting rate of returndepreciated on a straight-line basis. The company expects to sell 144,000 units of the equipment's product B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $360,000 with a 12-year life and no salvage value. It will be on investment each year. The expected annual income related to this equipment follows. Compute the (1) payback period and (2) accounting rate of return for this equipment. P1 P2 $225,000 Sales Costs Materials, labor, and overhead (except depreciation on new equipment)... 120,000 30,000 22500 172,500 52,500 15,750 36,750 Depreciation on new equipment Selling and administrative expenses . Total costs and expenses Pretax income income taxes (30%) Net income Check (1)5.39 years (2) 20.42%

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