Capilano Inc. has an old machine that is fully depreciated but has a current salvage value of $6,000. The company wants to purchase a new machine that would cost $60,000 and have a five-year useful life and zero salvage value. Expected changes in annual revenues and expenses if the new machine is purchased are:

Increased revenues		$60,000
Increased expenses:
Salary of additional operator	$20,000
Supplies	9,000
Depreciation	12,000
Maintenance	4,000	45,000
Increased net income		$18,000

Required:

1. What is the payback period on the new equipment?
2. What is the simple rate of return on the new equipment?