Question 1 : 1 15 marks ! Takchini Hot Springs Company has an old machine that is fully depreciated but has a current salvage* value of $5, 000 . The company wants to purchase a new machine that would cost $50, 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 520, 000 \\563,000 Increased expenses : 9, 000 Salary of additional operator Supplies Depreciation 12 , 000 Maintenance* 14 , 000 15 , 000 Increased net income $18 , 0.00 Required :" 1 ) What is the payback period on the new equipment ? 2 ) What is the simple rate of return on the new equipment ? Question 2 : 130 marks ! Grey Mountain Summit Company is considering starting a small catering business in Whitehorse . The company would need to purchase a delivery van and equipment costing $125 , 000 to operate the business and another SEO, OOD for inventories and other working capital needs . Rent for the building to be used by the business will be $35 , 000 per year . Bree , a Business student at 'Y' and part time employee* at Grey Mountain , indicates that the annual cash inflow from the business will amount to $120 , 000 . In* addition to the building rent , annual cash outflow for operating costs will amount to $40, 000 . Bree* wants to operate the catering business for only six years . She estimates that the equipment could be sold at that time for 4%6 of its original cost . Gree uses a 15%6 discount rate . ( Ignore income taxes in this problem . !" Required :" 1 ) Would you advise Gree to make this investment ?" Use Net Present Value and Profitability* analysis to support your decision . 1596 Present Description Years Amount Factor Value Van & equipment 15125 , 000 ) \\1.000 15125 , 000) Working capital 5 50, 000 ) 1 . 000 5 50 , 000)