Net present ratio and IRR. Use the information presented for Lakeside, Inc., in Mini-Exercise 16.4.
In Mini-Exercise 16.4, Net present value Lakeside, Inc., is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of $10,000 per month. The new equipment will have a five-year life and cost $450,000, with an estimated salvage value of $30,000. Lakeside's cost of capital is 10%.
Calculate the payback period and the accounting rate of return for the new production equipment.