Tu corporation is investigating automating a process by purchasing a machine for $423,000 that would have a 9 year useful life and no salvage value. by automating the process, the company would save $112,000 per year in cash operating costs. the new machine would replace some old equipment that would be sold for scrap now, yielding $27,000. the annual depreciation on the new machine would be $47,000. the simple rate of return on the investment is closest to:

a. 15.4%
b. 16.4%
c. 26.5%
d. 11.1%

simple rate of return = 16.4 %

so correct option is B. 16.4%

Explanation:

given data

purchasing a machine = $423,000

useful life =  9 years

cash operating costs = $112,000 per year

yielding = $27,000

annual depreciation = $47,000

to find out

simple rate of return on the investment

solution

we get here simple rate of return on the investment that is express as

simple rate of return =    .............................1

put here value we get

simple rate of return =

solve it we get

simple rate of return = 16.4 %

so correct option is B. 16.4%

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