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

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Finance

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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 $300,000 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 equipment's product each year. The expected annual income related to this equipment follows. $ 376,000 Sales Costs Materials, labor, and overhead (except depreciation) Depreciation on new equipment Selling and administrative expenses Total costs and expenses Pretax income Income taxes (35%) Net income 191,000 50,000 40,000 281,000 95,000 33,250 $ 61,750 Required: (1) Compute the payback period. Payback Period Choose Denominator: Choose Numerator: 7 = = Payback Period Payback period

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