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Mitsui Electronics, Limited, is considering buying a labor-saving pierce of equipment and provided the following...

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Accounting

Mitsui Electronics, Limited, is considering buying a labor-saving pierce of equipment and provided the following data:

Purchase cost of the equipment $ 299,000
Annual cost savings that will be provided by the equipment $ 65,000
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 it buy the equipment?

2a. Compute the simple rate of return on the equipment. Use straight-line depreciation based on the equipments useful life.

2b. Would the company buy the equipment if its required rate of return is 16%?

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