(Ignore Income Taxes in This Problem

question 110

Essay

(Ignore income taxes in this problem.) Sloman Company is considering purchasing a machine that would cost $436,800 and have a useful life of 5 years. The machine would reduce cash operating costs by $132,364 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.

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Definitions:

FASB

The Financial Accounting Standards Board, which is responsible for developing accounting standards in the United States.

Accounting Assumptions

The foundational principles that guide the preparation of financial statements, including going concern, accrual basis, and monetary unit assumptions.

Conventions

Agreed-upon practices or methodologies in accounting and finance that ensure consistency and compliance with standards.

Principles

In the context of accounting, principles refer to the fundamental guidelines or rules that govern the practice of accounting.