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Compute the simple rate of return on the equipment

    Assignment Instructions

    Assignment ID: FG132586273

    Colchester Company is considering purchasing a new piece of equipment. Relevant information concerning the equipment follows: (Ignore income taxes.)
    Purchase cost$180,000
    Annual cost savings that will be provided by the equipment$37,500
    Life of the equipment 12 years
    Required:
    Question 1: Compute the payback period for the equipment.
    Question 2: Compute the simple rate of return on the equipment. Use straight-line depreciation based on the equipment’s useful life, assuming $0 salvage value.

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