### Evaluation of New Production Equipment for Lakeside Inc.Lakeside Inc. is considering the replacement of its old production equipment with state-of-the-art technology that is expected to yield production cost savings of $10,000 per month. The planned new equipment will have a useful life of five years and will cost $420,000, with an estimated salvage value of $33,000. Lakeside Inc.'s cost of capital is 7%, and the company employs a straight-line depreciation method for its assets.#### Required:Calculate the payback period and the accounting rate of return for the proposed new production equipment.**Instructions:** Round your answers to two decimal places.**Input Data for Calculation:****Table: Calculation Parameters**| **Payback Period** | ||--------------------------|----------------------|| **Accounting Rate of Return** | |

Pay back period is the amount of times it takes to recover the cost of investment.it us calculated…

Lakeside Inc. is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of $10,000 per month. The new equipment will have a five-year life and cost $420,000, with an estimated salvage value of $33,000. Lakeside's cost of capital is 7%. Lakeside Inc. uses a straight-line depreciation method. Required: Calculate the payback period and the accounting rate of return for the new production equipment. (Round your answers to 2 decimal places.) Payback period years Accounting rate of return %

Lakeside Inc. is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of $10,000 per month. The new equipment will have a five-year life and cost $420,000, with an estimated salvage value of $33,000. Lakeside's cost of capital is 7%. Lakeside Inc. uses a straight-line depreciation method. Required: Calculate the payback period and the accounting rate of return for the new production equipment. (Round your answers to 2 decimal places.) Payback period years Accounting rate of return %

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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B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $360,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 144,000 units of the equipment’s product each year. The expected annual income related to this equipment follows. Compute the (1) payback period and (2) accounting rate of return for this equipment.
Vaughn Company is considering a capital investment of $378,400 in additional productive facilities. The new machinery is expected to have a useful life of 6 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $18,920 and $86,000, respectively. Vaughn has an 7% cost of capital rate, which is the required rate of return on the investment. (a1) Compute the cash payback period. (Round answer to 2 decimal places, e.g. 2.25.) Your answer is correct. Cash payback period (a2) eTextbook and Media (b) Your answer is correct. Annual rate of return Compute the annual rate of return on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 2.25%.) eTextbook and Media 4.4 years Net present value $ 10 Attempts: 1 of 5 used % Attempts: 1 of 5 used Using the discounted cash flow technique, compute the net present value. (Round present value factor calculations to 5…
Accounting Lakeside Inc. is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of $7,500 per month. The new equipment will have a five-year life and cost $320,000, with an estimated salvage value of $20,000. Lakeside's cost of capital is 12%. Lakeside Inc. uses a straight-line depreciation method. Required: Calculate the payback period and the accounting rate of return for the new production equipment. (Round your answers to 2 decimal places.)