Alesi Corporation is considenng purchasing a machine that would cost $451, 260 a

Question

Alesi Corporation is considenng purchasing a machine that would cost $451, 260 and have a useful life of 6 years The machine would reduce cash operating costs by $98,100 per year The machine would have a salvage value of $107,270 at the end of the project (Ignore income taxes) Compute the payback period for the machine (Round your answer to 2 decimal places.) Compute the simple rate of return for the machine (Round your Intermediate answers to nearest whole dollar and your final answer to 2 decimal places.)

Explanation / Answer

a. Payback period is that period during which the initial investment on the project is recovered.

Annual Savings = $98100

Payback Period = 4 + (451260 - (98100*4)) / 98100 or $451260 / $98100

= 4.60 years

b. Simple rate of return = Annual Saving / Investment * 100

98100 / 451260 * 100 = 21.74%

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.