Swaggerty Corporation is considering purchasing a machine that would cost $462,000 and have a useful life of 7 years. The machine would reduce cash operating costs by $115,500 per year. The machine would have no salvage value.
Required:
a. Compute the payback period for the machine.
b. Compute the simple rate of return for the machine.

Question

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The Answer of Swaggerty Corporation is considering purchasing a machine that would cost $462,000 and have a useful life of 7 years. The machine would reduce cash operating costs by $115,500 per year. The machine would have no salvage value.
Required:
a. Compute the payback period for the machine.
b. Compute the simple rate of return for the machine.

Swaggerty Corporation Is Considering Purchasing a Machine That Would Cost