Question

8)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 $120,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 48,000 units of the equipment’s product each year. The expected annual income related to this equipment follows.           Sales$75,000   Costs       Materials, labor, and overhead (except depreciation on new equipment) 40,000     Depreciation on new equipment 10,000     Selling and administrative expenses 7,500      Total costs and expenses 57,500      Pretax income 17,500   Income taxes (30%) 5,250      Net income$12,250    
 1.Compute the payback period.        
 2.Compute the accounting rate of return f

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