Alesi Corporation is considering purchasing a machine that would cost $752,800 a

Question

Alesi Corporation is considering purchasing a machine that would cost $752,800 and have a useful life of 12 years. The machine would reduce cash operating costs by $94,100 per year. The machine would have a salvage value of $107,230 at the end of the project. (Ignore income taxes.) Required: a. Payback period 8.00 years b. 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.) Simple rate of return! 12.501%

Explanation / Answer

a Payback period = 752800/94100= 8 b Annual net income = 94100-(752800-107230)/12= 40303 Simple rate of return =40303/752800= 5.35%

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