Purchase cost of the equipment ¥ 283,500 Annual cost savings that will be provided by the equipment ¥ 63,000 Life of the equipment 10 years

A piece of labour-saving equipment has just come onto the market, which Kaisen Electronics Ltd. could use to reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow (currency is in thousands of yen, denoted by ¥):

Required:

1-a. Compute the payback period for the equipment. (Round your answer to 1 decimal place.)

1-b. If the company requires a payback period of five years or less, would the equipment be purchased?

multiple choice 1

No

Yes

2-a. Compute the simple rate of return on the equipment. Use straight-line depreciation based on the equipment’s useful life. (Round your answer to 1 decimal place. (i.e., 0.123 should be considered as 12.3%).)

2-b. Will the equipment be purchased if the company requires a rate of return of at least 17%?