Denny Corporation is considering replacing a technologically obsolete machine with a newstate-of-the-art numerically controlled machine. The new machine would cost $180,000and would have a twelve-year useful life. Unfortunately, the new machine would have nosalvage value. The new machine would cost $26, 000 per year to operate and maintain, butwould save $58,000 per year in labor and other costs. The old machine can be sold now forscrap for $18,000. The simple rate of return on the new machine is closest to (Ignore incometaxes.):

Simple rate of return = Annual increamental net operating income / Initial investment Initial investment = $180,000 - $18,000 = $162,000 Annual depreciation = (Cost of machine - salvage value) / useful life =(180,000 - 0 ) / 12 = $15,000 Annual incremental net operating income = $58,000 - $26,000 - $15,000 = $17,000 Simple rate of return = Annual incremental net operating income / Initial investment = $17,000 / $162,000 = 10.5%

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Denny Corporation is considering replacing a technologically obsolete ma state-of-the-art numerically controlled machine. The new machine woul and would have a twelve-year useful life. Unfortunately, the new machine salvage value. The new machine would cost $26,000 per year to operate would save $58,000 per year in labor and other costs. The old machine car scrap for $18,000. The simple rate of return on the new machine is closest taxes.):

Denny Corporation is considering replacing a technologically obsolete ma state-of-the-art numerically controlled machine. The new machine woul and would have a twelve-year useful life. Unfortunately, the new machine salvage value. The new machine would cost $26,000 per year to operate would save $58,000 per year in labor and other costs. The old machine car scrap for $18,000. The simple rate of return on the new machine is closest taxes.):

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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