Crowl Corporation Is Investigating Automating a Process by Purchasing a Machine

question 35

Multiple Choice

Crowl Corporation is investigating automating a process by purchasing a machine for $792,000 that would have a 9 year useful life and no salvage value. By automating the process, the company would save $132,000 per year in cash operating costs. The new machine would replace some old equipment that would be sold for scrap now, yielding $21,000. The annual depreciation on the new machine would be $88,000. The simple rate of return on the investment is closest to (Ignore income taxes.) :

• A) 11.1%
• B) 16.7%
• C) 5.7%
• D) 5.1%

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