Calculating Accounting Rate of Return, Payback Period
Milo Company is considering the purchase of new equipment for its factory. It will cost $250,000 and have a $50,000 salvage value in five years. The annual net income from the equipment is expected to be $30,000, and depreciation is $40,000 per year. Calculate and evaluate Milo’s annual rate of return and payback period for the equipment.
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