Exercise $14-13($Algo$)$ Payback Period and Simple Rate of Return Computations $[$LO$14-1,$ LO$14-6]$

Mitsui Electronics, Limited, is considering buying a labor$-$saving pierce of equipment and provided the following data:

Purchase cost of the equipment$ $378,000$Annual cost savings that will be provided by the equipment$ $70,000$Life of the equipment$12$years

Required:

$1$a$.$ Compute the payback period for the equipment.

$1$b$.$ If the company requires a payback period of four years or less, would it buy the equipment?

$2$a$.$ Compute the simple rate of return on the equipment. Use straight$-$line depreciation based on the equipment$$s useful life.

$2$b$.$ Would the company buy the equipment if its required rate of return is $16\%?$