Compute the payback period and accounting rate of return

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Reference no: EM13172106

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: EM13172106

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