A cannery is considering installing an automatic case sealing machine to replace current hand methods. If they

Question:

A cannery is considering installing an automatic case sealing machine to replace current hand methods. If they purchase the machine for $3800 in June, at the beginning of the canning season, they will save $400 per month for the 4 months each year that the plant is in operation. Maintenance costs of the case sealing machine are expected to be negligible. The case-sealing machine is expected to be useful for five annual canning seasons and will have no salvage value at the end of that time. What is the payback period? Calculate the nominal annual rate of return based on the estimates.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...