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QUESTION 5 Payback Method, Simple Rate of Return Valkey Company has an old machine that is fully depreciated but has a current salvage value of
QUESTION 5 Payback Method, Simple Rate of Return Valkey 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 $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: $63,000 Increased revenues Increased expenses. Salary of additional operator Supplies Depreciation 12,000 Maintenance Increased net income $20,000 9,000 4,000 45.000 $18,000 (Ignore income taxes in this problem.) Required: a) What is the payback period on the new equipment? b) What is the simple rate of return on the new equipment
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