Casco Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $280,000 with a 7-year life, no salvage value, and will be depreciated using straight-line depreciation. The expected annual income related to this equipment follows. Compute the (a) payback period and (b) accounting rate of return for this equipment.
Definitions:
Sand and Gravel
Loose granular materials consisting of rock fragments. Sand particles are smaller than gravel particles.
Groundwater Flow
The movement of water through the pore spaces and fractures in underground soil and rock layers.
Subsidence
The gradual sinking of the ground's surface, which can occur due to natural processes like the compacting of sediment or human activities such as groundwater extraction.
Gradient
A measure of how one quantity changes or varies over distance or another quantity, often expressed as a slope or rate of incline.
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