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Santana Rey is considering the purchase of equipment for Business Solutions that would allow the company to add a new product to its computer furniture line. The equipment is expected to cost $288,000 and to have a six- year life and no salvage value. It will be depreciated on a straight-line basis. Business Solutions expects to sell 100 units of the equipment's product each year. The expected annual income related to this equipment follows. S 380,000 Sales Costs Materials, labor, and overhead (except depreciation) Depreciation on new equipment Selling and administrative expenses 193,000 48,000 36,500 277,500 102,500 35,875 Total costs and expenses Pretax income Income taxes (35%) Net income $ 66,625 Requlred: (1) Compute the payback perlod. Payback Period Choose Numerator: Choose Denominator: Payback Period Payback period %3D

Santana Rey is considering the purchase of equipment for Business Solutions that would allow the company to add a new product to its computer furniture line. The equipment is expected to cost $288,000 and to have a six- year life and no salvage value. It will be depreciated on a straight-line basis. Business Solutions expects to sell 100 units of the equipment's product each year. The expected annual income related to this equipment follows. S 380,000 Sales Costs Materials, labor, and overhead (except depreciation) Depreciation on new equipment Selling and administrative expenses 193,000 48,000 36,500 277,500 102,500 35,875 Total costs and expenses Pretax income Income taxes (35%) Net income $ 66,625 Requlred: (1) Compute the payback perlod. Payback Period Choose Numerator: Choose Denominator: Payback Period Payback period %3D

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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(1) Compute the payback period.

1b) Compute the accounting rate of return for this equipment.
 

Santana Rey is considering the purchase of equipment for Business Solutions that would allow the company to add a new product to its computer furniture line. The equipment is expected to cost $288,000 and to have a six- year life and no salvage value. It wll be depreciated on a straight-line basis. Business Solutions expects to sell 100 units of the equipment's product each year. The expected annual Iincome related to this equipment follows. Sales S 380,000 Costs Materials, labor, and overhead (except depreciation) Depreciation on new equipment Selling and administrative expenses 193,000 48,000 36,500 277,500 102,500 Total costs and expenses Pretax income Income taxes (35%) 35,875 Net income $ 66,625 Requlred: (1) Compute the payback period. Payback Period Choose Numerator: Choose Denominator: Payback Period Payback period
Transcribed Image Text:Santana Rey is considering the purchase of equipment for Business Solutions that would allow the company to add a new product to its computer furniture line. The equipment is expected to cost $288,000 and to have a six- year life and no salvage value. It wll be depreciated on a straight-line basis. Business Solutions expects to sell 100 units of the equipment's product each year. The expected annual Iincome related to this equipment follows. Sales S 380,000 Costs Materials, labor, and overhead (except depreciation) Depreciation on new equipment Selling and administrative expenses 193,000 48,000 36,500 277,500 102,500 Total costs and expenses Pretax income Income taxes (35%) 35,875 Net income $ 66,625 Requlred: (1) Compute the payback period. Payback Period Choose Numerator: Choose Denominator: Payback Period Payback period
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