The management of Dewitz Corporation is considering a project that would require an initial investment of $72,000. No other cash outflows would be required. The present value of the cash inflows would be $85,680. The profitability index of the project is closest to:
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(Ignore income taxes in this problem.) Brewer Company is considering purchasing a machine that would cost $578,100 and have a useful life of 8 years. The machine would reduce cash operating costs by $92,708 per year. The machine would have a salvage value of $116,020 at the end of the project.
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| Required |
| a. |
Compute the payback period for the machine. (Round your answer to 2 decimal places.)
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| b. |
Compute the simple rate of return for the machine. (Round your intermediate calculations to nearest dollar amount and final answer to 2 decimal places.)
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