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CoursHeroTranscribedText: EXERCISE 13-12 Basic f Return Computations [L05, L06] Martin Company is considering the purchase...

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CoursHeroTranscribedText: EXERCISE 13-12 Basic f Return Computations [L05, L06] Martin Company is considering the purchase of a new piece of equipment. Relevant information concerning the equipment follows: Purchase cost . . .. $180,000 Annual cost savings that will be provided by the equipment .. ... $37,500 Life of the equipment . .... . 12 years Required: (Ignore income taxes.) 1. Compute the payback period for the equipment. If the company rejects all proposals with payback period of more than four years, would the equipment be purchased? 2. Compute the simple rate of return on the equipment. Use straight-line depreciation based o the equipment's useful life. Would the equipment be purchased if the company's required rat of return is 14%

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