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%.

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Definitions:

Evaluates

Evaluates involves making judgments about the value, quality, outcome, or significance of something or someone based on evidence and criteria.

Cognitive-Social Theory

A theoretical perspective that emphasizes the role of cognitive processes in understanding social behavior.

Humanistic Theory

An approach in psychology that emphasizes empathy and stresses the good in human behavior.

Psychodynamic Theory

A theory in psychology which asserts that psychological processes and behaviors stem from the interaction of dynamic unconscious and conscious factors.