Compute the payback period

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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 products each year.  The expected annual incomes related to this equipment follows.

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Question:
 
1.  Compute the (1) payback period and (2) accounting rate of return for this equipment. (Record answers as percents, rounded to one decimal.)

 

Reference no: EM13498588

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