Mini-Exercise 16-8 (Algo) Payback period and accounting rate of return LO 16-9, 16-10 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. Payback period Accounting rate of return 3.75 years 15.51 %
Mini-Exercise 16-8 (Algo) Payback period and accounting rate of return LO 16-9, 16-10 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. Payback period Accounting rate of return 3.75 years 15.51 %
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Mini-Exercise 16-8 (Algo) Payback period and accounting rate of return LO 16-9, 16-10
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.
Payback period
Accounting rate of return
3.75 years
15.51 %
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