Abc steel co. is considering buying a new machine in order to increase its production capacity using new technology. details about the new equipment are below: purchase cost 300,000savings offered by the new machine $62,500 life of the new machine per year 15 years 1.-calculate the payback period for the new machine a. 7.2 years b. 6.8 years c. 4.8 years d. 12.4 years 2.-the corporate policy of abc steel co. is to reject all proposal with a payback period of more than 7 years. therefore, would abc buy the new machine? a. yes b. no c. cannot be determined d. none of above 3.-calculate the simple rate of return of the equipment using the straight-line depreciation method based on the new machine's useful life. a. 1096 b. 14.16%c. 16.49%d. 9.34% 4.-the corporate policy of abc steel co. is to require a rate of return of 10%. based on this requirement, would abc buy the new machine? a. yes b. no c. cannot be determined d. none of above
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