Acc225 Fundamental Accounting Principles: Serial Problem 25 Santana Rey is considering the purchase

Acc225 Fundamental Accounting Principles
Serial Problem 25 (SP25)
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 $300,000 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.
Sales 375,000
Costs Materials, labor and overhead (except depreciation) 200,000
Depreciation on new equipment 50,000
Selling and administrative expenses 37,500
Total costs and expenses 287,500
Pretax income 87,500
Income taxes (30%) 26,250
Net income 61,250

Required:
Compute the (1) payback period and (2) accounting rate of return for this equipment (Record answers as percents, rounded to one decimal).
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