Hinck Corporation is investigating automating a process by purchasing a new mach

Question

Hinck Corporation is investigating automating a process by purchasing a new machine for $514,000 that would have a 10 year useful life and no salvage value. By automating the process, the company would save $110,000 per year in cash operating costs. The company's current equipment would be sold for scrap now, yielding $21,000. The annual depreciation on the new machine would be $51,400. (Ignore income taxes.) Required: Determine the simple rate of return on the investment to the nearest tenth of a percent. (Round your answer to 1 decimal place.) Simple rate of return

Explanation / Answer

Annual net income = 110000-51400= 58600 Simple rate of return = 58600/(514000-21000)= 11.9%

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