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Southern Cola is considering the purchase of a special...

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Accounting

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Southern Cola is considering the purchase of a special purpose bottling machine for $28,000. It is expected to have a useful life of 7 years with a zero terminal disposal price. The plant manager estimates the following savings in cash-operating costs Year Amount 10,000 8,000 6,000 5,000 4,000 3,000 3,000 2 3 5 7 Required. Compute the pay back period net of income taxes assuming a 40% tax rate using straig depreciation on the special purpose bottling machine 2. Compute the accrual accounting rate of return net of income taxes based on the net initial investment. Use the average annual savings in cash-operating costs whern computing the numerator of the accrual accounting rate of return. Assume the straight I method is used when computing depreciation. (Assume a 40% income tax rate)

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