Russnak Corporation is investigating automating a process by purchasing a new machine for $501,000 that would have a 6 year useful life and no salvage value. By automating the process, the company would save $125,000 per year in cash operating costs. The company's current equipment would be sold for scrap now, yielding $31,000. The annual depreciation on the new machine would be $83,500. (Ignore income taxes.)
Required:
Determine the simple rate of return on the investment. (Round your answer to 1 decimal place.)
If it is helpful, please rate the answer and if any doubt arises let me know
Simple rate of return | = | 8.8% | |
Workings: | |||
Computation of Simple rate of return: | |||
Simple rate of return | = | Net Profit / Investment | |
= | $41500 / $470000 | ||
= | 8.8% | ||
Net Profit | = | Annual Cash Inflows -Annual Depreciation on new machine | |
= | $125000 - $83500 | ||
= | $ 41,500 | ||
Investment | = | Purchase price of new machine - Salvage value of old machine | |
= | $501000 - $31000 | ||
= | $ 4,70,000 |
Russnak Corporation is investigating automating a process by purchasing a new machine for $501,000 that would...
Crowl Corporation is investigating automating a process by purchasing a machine for $801,000 that would have a 9 year useful life and no salvage value. By automating the process, the company would save $137,000 per year in cash operating costs. The new machine would replace some old equipment that would be sold or scrap now. yield ng S O ·The annual depreciation on the new machine would be 8 O he simple rate of return on the investment is closest...
2. Mattice Corporation is considering investing $640,000 in a project. The life of the project would be 6 years. The project would require additional working capital of $24,000, which would be released for use elsewhere at the end of the project. The annual net cash inflows would be $158,000. The salvage value of the assets used in the project would be $34,000. The company uses a discount rate of 18%. (lgnore income taxes.) Click here to view Exhibit 13B-1 and...
2. The management of Nixon Corporation is investigating purchasing equipment that would cost $536,000 and have a 7 year life with no salvage value. The equipment would allow an expansion of capacity that would increase sales revenues by $373,000 per year and cash operating expenses by $215,500 per year. (Ignore income taxes.) Required: Determine the simple rate of return on the investment. (Round your answer to 1 decimal place.) Simple rate of return The management of Truelove Corporation is considering...
2. Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $310,000 and would have a ten-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $52,000 per year to operate and maintain, but would save $93,000 per year in labor and other costs. The old machine can be sold now for scrap for $31,000. The simple rate of return on the...
Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $110,000 and would have a sixteen-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $12,000 per year to operate and maintain, but would save $42,000 per year in labor and other costs. The old machine can be sold now for scrap for $11,000. The simple rate of return on the new...
The management of Nixon Corporation is investigating purchasing equipment that would cost $526,000 and have a 7 year life with no salvage value. The equipment would allow an expansion of capacity that would increase sales revenues by $368,000 per year and cash operating expenses by $213,000 per year. (Ignore income taxes.) Required: Determine the simple rate of return on the investment.
Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $200,000 and would have a sixteen-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $30,000 per year to operate and maintain, but would save $62,000 per year in labor and other costs. The old machine can be sold now for scrap for $20,000. The simple rate of return on the new...
1. (Ignore income taxes in this problem.) Gocke Company is considering purchasing a machine that would cost $478,800 and have a useful life of 5 years. The machine would reduce cash operating costs by $114,000 per year. The machine would have no salvage value. Required: a. Compute the payback period for the machine. (10 points) b. Compute the simple rate of return for the machine. (10 points)
Bailey Corporation is considering modernizing its production by purchasing a new machine and selling an old machine. The following data have been collected on this investment: Testbank Question 57 Bailey Corporation is considering modernizing its production by purchasing a new machine and selling an old machine. The following data have been collected on this investment: Old Machine Cost Accumulated amortization Remaining life Current salvage value Salvage value in 4 years Annual cash operating costs $40,000 $20,000 4 years $5,000 New...
Testbank Question 55 Bailey Corporation is considering modernizing its production by purchasing a new machine and selling an old machine. The following data have been collected on this investment: New Machine Old Machine Cost Accumulated amortization Remaining life Current salvage value Salvage value in 4 years Annual cash operating costs $40,000 $20,000 4 years $5,000 $0 $18,000 Cost Estimated useful life Salvage value in 4 years Annual cash operating costs $19,000 4 years $5,000 $14,000 The income tax rate is...