The management of Stanforth Corporation
The management of Stanforth Corporation is investigating automating a process. Old equipment, with a current salvage value of $15,000, would be replaced by a new machine. The new machine would be purchased for $408,000 and would have a 6 year useful life and no salvage value. By automating the process, the company would save $141,000 per year in cash operating costs. The simple rate of return on the investment is closest to:

18.6%

17.9%

34.6%

16.7%

Leave a Reply

Your email address will not be published. Required fields are marked *