Denny Corporation Is Considering Replacing a Technologically Obsolete Machine with a New

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:

A) 7.78%.
B) 8.75%.
C) 20.00%.
D) 22.22%.

Correct Answer:

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