Exercise 8-13 Basic Payback period and Simple Rate of Return Computations (LO8-1, LO8-6] A piece of laborsaving equipment has just come onto the market that Mitsui Electronics, Ltd., could use to reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow. Purchase cost of the equipment Annual cost savings that will be provided by the equipment Life of the equipment $360,000 $ 75,000 12 years Required: 1-a. Compute the payback period for the equipment. Payback Period Choose Denominator: = Choose Numerator: Payback Period Payback period years 1-b. If the company requires a payback period of four years or less, would the equipment be purchased? Yes No 2-a. Compute the simple rate of return on the equipment. Use straight-line depreciation based on the equipment's useful life. Simple Rate of Retur Choose Denominator: Choose Numerator: = Simple Rate of Retum = Simple rate of return