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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 (currency is in thousands of yen, denoted by 7 ) :
Required:
(Ignore income taxes.)
(a) Compute the payback period for the equipment. If the company requires a payback period of four years or less, would the equipment be purchased?

Respuesta :

The term "payback time" refers to the amount of years needed to recoup the initial monetary outlay.

What is payback period?

The term "payback time" refers to the amount of years needed to recoup the initial monetary outlay. It is, in other words, the length of time that a machine, facility, or other investment has generated enough net income to pay its investment costs. In capital planning, the term "payback period" describes the amount of time needed to recover investment costs or to break even.

The payback period would be two years, for instance, if an investment of $1,000 was made at the beginning of year one and returned $500 at the conclusion of year one and year two, respectively.

Payback period = Initial outlay/Annual cost saving

                               = $484,500/$85,000

                                = 5.7 years.

The equipment should not be purchased because it includes a longer payback period than the company's needed payback period.

To learn more about payback period refer to:

https://brainly.com/question/23149718

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