Simple rate of return on the new machine

Reference no: EM13135143

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. The simple rate of return on the new machine is closest to:

A. 8.75%

B. 20.00%

C. 7.78%

D. 22.22%

Reference no: EM13135143

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