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Lakeside Incorporated 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 $337,500, with an estimated salvage value of $30,000. Lakeside's cost of capital is 9%. Lakeside Incorporated uses a straight-line depreciation method. Required: Calculate the payback period and the accounting rate of return for the new production equipment. Note: Round your answers to 2 decimal places. Payback period Accounting rate of return years

Lakeside Incorporated 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 $337,500, with an estimated salvage value of $30,000. Lakeside's cost of capital is 9%. Lakeside Incorporated uses a straight-line depreciation method. Required: Calculate the payback period and the accounting rate of return for the new production equipment. Note: Round your answers to 2 decimal places. Payback period Accounting rate of return years

FINANCIAL ACCOUNTING
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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Lakeside Incorporated 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 $337,500, with an estimated salvage value of $30,000. Lakeside's cost of capital is 9%. Lakeside Incorporated uses a straight-line depreciation method. Required: Calculate the payback period and the accounting rate of return for the new production equipment. Note: Round your answers to 2 decimal places. Payback period Accounting rate of return years
Transcribed Image Text:Lakeside Incorporated 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 $337,500, with an estimated salvage value of $30,000. Lakeside's cost of capital is 9%. Lakeside Incorporated uses a straight-line depreciation method. Required: Calculate the payback period and the accounting rate of return for the new production equipment. Note: Round your answers to 2 decimal places. Payback period Accounting rate of return years
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