Exercise 26-6 (Algo) Payback period, equal cash flows, and accounting rate of return LO P1, P2 B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $360,000 and has a 12-year life and no salvage value. The expected annual income for each year from this equipment follows. Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Equipment Selling, general, and administrative expenses Income (a) Compute the annual net cash flow. (b) Compute the payback period. (c) Compute the accounting rate of return for this equipment. Complete this question by entering your answers in the tabs below. Required A Required B Compute the annual net cash flow. Annual Results from Investment Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Equipment Selling, general, and administrative expenses Income Net cash flow Required C < Required A Income $ 225,000 $ 120,000 30,000 22,500 52,500 $225,000 120,000 30,000 22,500 $ 52,500 Cash Flow Required B >

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Exercise 26-6 (Algo) Payback period, equal cash flows, and accounting rate of return LO P1, P2
B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The
equipment costs $360,000 and has a 12-year life and no salvage value. The expected annual income for each year from this
equipment follows.
Sales of new product
Expenses
Materials, labor, and overhead (except depreciation)
Depreciation-Equipment
Selling, general, and administrative expenses
Income
(a) Compute the annual net cash flow.
(b) Compute the payback period.
(c) Compute the accounting rate of return for this equipment.
Complete this question by entering your answers in the tabs below.
Required A Required B Required C
Compute the annual net cash flow.
Annual Results from Investment
Sales of new product
Expenses
Materials, labor, and overhead (except depreciation)
Depreciation Equipment
Selling, general, and administrative expenses
Income
Net cash flow
<Required A
Income
$ 225,000
$
120,000
30,000
22,500
52,500
$225,000
120,000
30,000
22,500
$52,500
Cash Flow
Required B >
Transcribed Image Text:Exercise 26-6 (Algo) Payback period, equal cash flows, and accounting rate of return LO P1, P2 B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $360,000 and has a 12-year life and no salvage value. The expected annual income for each year from this equipment follows. Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Equipment Selling, general, and administrative expenses Income (a) Compute the annual net cash flow. (b) Compute the payback period. (c) Compute the accounting rate of return for this equipment. Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the annual net cash flow. Annual Results from Investment Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Equipment Selling, general, and administrative expenses Income Net cash flow <Required A Income $ 225,000 $ 120,000 30,000 22,500 52,500 $225,000 120,000 30,000 22,500 $52,500 Cash Flow Required B >
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