Ferris 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:
a)What is the payback period on the new equipment?
b)What is the simple rate of return on the new equipment?