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

question 105

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 labour 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 which of the following? (Ignore income taxes in this problem.)

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

---

Definitions:

Neurotic

Refers to an individual experiencing, or prone to experience, a high level of emotional instability and anxiety.

Personality Differences

Variations among individuals in patterns of thinking, feeling, and behaving that make each person unique.

Rorschach Inkblot Test

A psychological test in which subjects' perceptions of inkblots are recorded and then analyzed using psychological interpretation, complex algorithms, or both.

Projective

Relating to techniques or tests used in psychology to assess personality and emotions based on an individual's responses to ambiguous stimuli.