(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.

Quizplus · Accepted Answer

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