Compute the simple rate of return on the new machine

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Question - Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $450,000 and would have a ten-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $20,000 per year to operate and maintain, but would save $100,000 per year in labor and other costs. The old machine can be sold now for scrap for $50,000. Compute the simple rate of return on the new machine?

a. 20.00%

b. 22.22%

c. 8.75%

d. 7.78%

Reference no: EM133123776

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