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Calculate the payback period and the accounting rate

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Problem - Lakeside Inc. is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of $5,000 per month. The new equipment will have a five-year life and cost $225,000, with an estimated salvage value of $30,000. Lakeside's cost of capital is 10%. Lakeside Inc. uses a straight-line depreciation method. Calculate the payback period and the accounting rate of return for the new production equipment.

Reference no: EM132837921

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