Lakeside Incorporated 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 $450,000, with an estimated salvage value of $40,000. 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. Answer is complete but not entirely correct. 3.75 years 0.16 % Payback period Accounting rate of return

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.