Question: QUESTION 5 Payback Method, Simple Rate of Return Volkey Company has an old machine that is fully depreciated but has a current salvage value of

QUESTION 5

Payback Method, Simple Rate of Return

Volkey 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 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:

(Ignore income taxes in this problem.)

Required:

What is the payback period on the new equipment?

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

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