Denny Corporation Is Considering Replacing a Technologically Obsolete Machine with a New

question 266

Multiple Choice

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 (Ignore income taxes.) :

• A) 8.75%
• B) 20.00%
• C) 7.78%
• D) 22.22%

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Definitions:

Type A Orientation

The way people are characterized as competitive, impatient, aggressive, and achievement oriented.

Aggressive

A behavior characterized by boldness or assertiveness, with a possible inclination to dominate or challenge others.

Personality Types

A method for categorizing individuals into specific groups based on their patterns of behavior, thoughts, and feelings.

Under Pressure

Experiencing stress or tension as a result of challenging circumstances or high demands.