Ramson Corporation Is Considering Purchasing a Machine That Would Cost

question 185

Essay

Ramson Corporation is considering purchasing a machine that would cost $515,760 and have a useful life of 8 years. The machine would reduce cash operating costs by $92,100 per year. The machine would have a salvage value of $107,210 at the end of the project. (Ignore income taxes.)Required:a. Compute the payback period for the machine. (Round your answer to 2 decimal places.)
b. Compute the simple rate of return for the machine. (Round your intermediate calculations to nearest whole dollar and your final answer to 2 decimal places.)

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Definitions:

Voting Shares

Shares that give the shareholder the right to vote on company matters, such as electing directors or approving acquisitions, indicating a degree of control in the company.

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to its shareholders.

Carrying Amount

The book value of assets and liabilities as reported in the financial statements, factoring in depreciation, amortization, and impairment.

Voting Shares

Shares that give the shareholder the right to vote on matters of corporate policy and the selection of board members.