Reference no: EM131772824

Magna Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment:

Old Equipment			New Equipment
Cost	$81,040	Cost	$38,080
Accumulated depreciation	$40,800	Estimated useful life	8 years
Remaining life	8 years	Salvage value in 8 years	$4,728
Current salvage value	$10,000	Annual cash operating costs	$29,200
Salvage value in 8 years	$0
Annual cash operating costs	$35,900

Depreciation is $10,130 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value $4,728. Warning
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Determine the cash payback period (Ignore income taxes). (Round answer to 3 decimal places, e.g. 15.225.)

Calculate the annual rate of return. (Round answer to 2 decimal places, e.g. 15.25%.)

Calculate the net present value assuming a 16% rate of return (Ignore income taxes). (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124 and final answer to 0 decimal places, e.g. 5,275.)