Dobson Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would resut in an annual increase in net income of $59,000. The equipment will have an initial cost of $507,000 and have an seven year life. There is no salvage value of the equipment. The hurdle rate is 14%. Ignore income taxes. a. Calculate accounting rate of return. (Round your answer to 2 decimal places.) Rate of Retum b. Calculate payback period (Round your answer to one decimal place.) Years Payback Period

Dobson Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would resut in an annual increase in net income of $59,000. The equipment will have an initial cost of $507,000 and have an seven year life. There is no salvage value of the equipment. The hurdle rate is 14%. Ignore income taxes. a. Calculate accounting rate of return. (Round your answer to 2 decimal places.) Rate of Retum b. Calculate payback period (Round your answer to one decimal place.) Years Payback Period

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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