Oriole 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		$81,200		Cost		$39,600
Accumulated depreciation		$41,900		Estimated useful life		8 years
Remaining life		8 years		Salvage value in 8 years		$4,800
Current salvage value		$10,620		Annual cash operating costs		$30,000
Salvage value in 8 years		$0
Annual cash operating costs		$35,300

Depreciation is $10,150 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 of $4,800.

(a)

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Your answer is correct.

Determine the cash payback period. (Ignore income taxes.) (Round answer to 3 decimal places, e.g. 15.275.)

Cash payback period

enter the cash payback period in years rounded to 3 decimal places

years

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(b)

• Your Answer
• Correct Answer

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Calculate the annual rate of return. (Round answer to 2 decimal places, e.g. 15.25%.)

Annual rate of return

enter the annual rate of return in percentages rounded to 2 decimal places

%

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(c)

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(d)

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