(Ignore income taxes in this problem.) Ferris 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 which would cost $60,000 and have a 5-year useful life and zero salvage value. Expected changes in annual revenues and expenses if the new machine is purchased are:
Required:
a. Compute the payback period on the new equipment.
b. Compute the simple rate of return on the new equipment.

Question

(Ignore income taxes in this problem.) Ferris 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 which would cost $60,000 and have a 5-year useful life and zero salvage value. Expected changes in annual revenues and expenses if the new machine is purchased are:  
Required:
a. Compute the payback period on the new equipment.
b. Compute the simple rate of return on the new equipment.

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The Answer of (Ignore income taxes in this problem.) Ferris 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 which would cost $60,000 and have a 5-year useful life and zero salvage value. Expected changes in annual revenues and expenses if the new machine is purchased are:  
Required:
a. Compute the payback period on the new equipment.
b. Compute the simple rate of return on the new equipment.

(Ignore Income Taxes in This Problem