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 $10,000 $120,000 Increased expenses 14,000 Salary of additional operator Supplies 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?
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 $10,000 $120,000 Increased expenses 14,000 Salary of additional operator Supplies 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?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Wizard Company has an old machine that is fully
|
Increased revenues |
$10,000 |
$120,000 |
|
Increased expenses |
14,000 |
|
|
Salary of additional operator |
|
|
|
Supplies |
|
|
|
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
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