Problem 13-29A (Part Level Submission)

Magna Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment.

Old Equipment				New Equipment
Cost		$80,560		Cost		$38,000
Accumulated depreciation		$40,300		Estimated useful life		8 years
Remaining life		8 years		Salvage value in 8 years		$4,904
Current salvage value		$10,000		Annual cash operating costs		$29,000
Salvage value in 8 years		$0
Annual cash operating costs		$36,000

Depreciation is $10,070 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value $4,904.

(a)

Determine the cash payback period (Ignore income taxes). (Round answer to 3 decimal places, e.g. 15.275.)

Cash payback period

years