Reference no: EM13608392

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 $264,000 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 product each year. The expected annual income related to this equipment follows. Sales $ 379,000 Costs Materials, labor, and overhead (except depreciation) 196,000 Depreciation on new equipment 44,000 Selling and administrative expenses 33,000 Total costs and expenses 273,000 Pretax income 106,000 Income taxes (30%) 31,800 Net income $ 74,200 Please show steps: Compute payback period: Compute the accounting rate of return for this equipment: