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Simone Company is considering the purchase of a new machine costing $50,000. It is expected to save $9,000 cash per year for 10 years, has an estimated useful life of 10 years, and no salvage value. Management will not make any investment unless at least an 18% rate of return can be earned. Using the net present value method, determine if the proposal is acceptable. Assume all tax effects are included in these numbers.

Given the following annual costs, compute the payback period for the new machine if its initial cost is $420,000. Old Machine New Machine Depreciation Labor Repairs $18,000 72,000 21,000 12,000 $123,000 $42,000 63,000 4,500 3.600 $113,000 Other costs