Crowl Corporation is investigating automating a process by purchasing a machine

Question

Crowl Corporation is investigating automating a process by purchasing a machine for $794700 that would have a 9 year useful life and no salvage value. By automating the process, the company would save $133.500 per year in cash operating costs. The new machine would replace some old equipment that would be sold for scrap now, yielding $21,300. The annual depreciation on the new machine would be $88,300 The simple rate of return on the investment is closest to (gnore income taxes ) Multiple Choice 1113% 5.03% 5.84%

Explanation / Answer

Answer is 5.84%

Investment 794700 sale of old machine 21300 Net investment 773400 Net opeating cash flow 133500 depn 88300 net income per annum 45200 Simple return=average income/investment 5.84%

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