Wizard Company has an old machine that is fully depreciated but has a current salvage value of $10,000. 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:

Increased revenues		$120,000
Increased expenses
Salary of additional operator	$56,000
Supplies	14,000
Depreciation	12,000
Maintenance	8,000	90,000
Increased net income		$30,000

(Ignore income taxes in this problem.)

Required:

1. What is the payback period on the new equipment?

2. What is the simple rate of return on the new equipment?