Howe Inc. has an old zamboni that is fully depreciated but has a current salvage value of $8,000. The company wants to purchase a new zamboni that would cost $95,000 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 $67,000

Increased expenses

Salary of additional operator $20,000

Supplies 9,000

Depreciation 19,000

Maintenance 4,000 49,000

Increased Net Income $15,000

Required:

1. Calculate the payback period on the new zamboni. (3 marks)
2. Calculate the simple rate of return. (3 marks)