(Ignore Income Taxes in This Problem

question 115

Multiple Choice

(Ignore income taxes in this problem. ) The management of Rouleau Corporation is investigating automating a process.Old equipment,with a current salvage value of $10,000,would be replaced by a new machine.The new machine would be purchased for $240,000 and would have a 6 year useful life and no salvage value.By automating the process,the company would save $64,000 per year in cash operating costs.The simple rate of return on the investment is closest to:

• A)10.0%
• B)26.7%
• C)10.4%
• D)16.7%

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Definitions:

Gas Fireplace

A heating appliance that uses natural gas or propane as fuel to produce heat, often designed to mimic a traditional wood-burning fireplace with less maintenance.

Substantial

of considerable importance, size, or worth; significant.

Refurbish

The process of cleaning, renovating, or updating an item, particularly to restore it to a good condition or improve its functionality.

Terminated

Brought to an end or concluded, which can apply to contracts, employment, or any other agreement.