Question
Magna Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected
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Magna Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment. Old Equipment New Equipment Cost $81,040 Cost Accumulated depreciation $40,800 Remaining life Current salvage value Salvage value in 8 years Annual cash operating costs 8 years $10,000 $0 $35,900 Estimated useful life Salvage value in 8 years Annual cash operating costs $38,080 8 years $4,728 $29,200 Depreciation is $10,130 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value $4,728. (a) Determine the cash payback period (Ignore income taxes). (Round answer to 3 decimal places, e.g. 15.275.) Cash payback period 4.191 years
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