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Santana Rey is considering the purchase of equipment for Business Solutions that would allow the...

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Accounting

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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 $392,000 and to have a seven-year life and no salvage value. It will be depreciated on a straight-line basis. Business Solutions expects to sell 100 units of the equipment's product each year. The expected annual income related to this equipment follows. $382,000 Sales Costs Materials, labor, and overhead (except depreciation) Depreciation on new equipment Selling and administrative expenses Total costs and expenses Pretax income Income taxes (358) Net Income 200,000 56,000 32,500 280.500 93,500 32,725 $ 60,775 Required: (1) Compute the payback period. Payback Period Choose Numerator: Choose Denominator: Payback Period Payback period 0 (2) Compute the accounting rate of return for this equipment. Accounting Rate of Return Choose Numerator: Choose Denominator: 1 = Accounting Rate of Return Accounting rate of return 0

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