BSU Inc. wants to purchase a new machine for $29,300, excluding $1,500 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,000, and BSU Inc. expects to sell it for that amount. The new machine would decrease operating costs by $7,000 each year of its economic life. The straight-line depreciation method would be used for the new machine, for a six-year period with no salvage value.
Please show calculations to better understand the problem and how to arrive at correct answer. Thank you
1.Determine the cash payback period. (Round cash payback period to 1 decimal place, e.g. 10.5.)
2.Determine the approximate internal rate of return. (Round answer to 0 decimal places, e.g. 10.)