Russnak Corporation Is Investigating Automating a Process by Purchasing a New

question 257

Essay

Russnak Corporation is investigating automating a process by purchasing a new machine for $525,000 that would have a 6 year useful life and no salvage value. By automating the process, the company would save $165,000 per year in cash operating costs. The company's current equipment would be sold for scrap now, yielding $32,000. The annual depreciation on the new machine would be $87,500. (Ignore income taxes.)Required:Determine the simple rate of return on the investment. (Round your answer to 1 decimal place.)

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Definitions:

Irrigation

Irrigation is the artificial application of water to land to assist in the growing of crops and vegetation or to replenish depleted aquifers.

Slash-And-Burn Horticulture

A farming method that involves cutting and burning plant life to create fields for agriculture.

Equivalent Value

A concept referring to the equality of value between two entities, often used in economics and exchange theories.

Hard Bargaining

A negotiation strategy involving firm stands on demands and little willingness to compromise.