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Calculate the payback period and the accounting rate

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Question - Lakeside Inc. is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of $10,000 per month. The new equipment will have a five-year life and cost $390,000, with an estimated salvage value of $40,000. Lakeside's cost of capital is 10%. Lakeside Inc. uses a straight-line depreciation method.

Required - Calculate the payback period and the accounting rate of return for the new production equipment.

Reference no: EM132952671

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