Lexington Corp. is considering the purchase of a new piece of equipment. The cost savings from the
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Question:
Lexington Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $ The equipment will have an initial cost of $ and have an six year life. There is no salvage value of the equipment. The hurdle rate is Ignore income taxes.
a Calculate accounting rate of return. Do not round intermediate calculations and round your final answer to decimal place.
b Calculate payback period Round your answer to one decimal place.
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