Sheridon Corporation is investigating automating a process by purchasing a new m

Question

Sheridon Corporation is investigating automating a process by purchasing a new machine for $522,000 that would have a 8 year useful life and no salvage value. By automating the process, the company would save $150,000 per year in cash operating costs. The company's current equipment would be sold for scrap now, yielding $29,000. The annual depreciation on the new machine would be $65,250. (Ignore income taxes.)


Required: Determine the simple rate of return on the investment. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)

Explanation / Answer

simple rate of return=(150000+29000-65250)/522000 =0.2179 =21.79 %

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