(Ignore income taxes in this problem.)Crowl Corporation is investigating automating a process by purchasing a machine for $792,000 that would have a 9 year useful life and no salvage value.By automating the process,the company would save $132,000 per year in cash operating costs.The new machine would replace some old equipment that would be sold for scrap now,yielding $21,000.The annual depreciation on the new machine would be $88,000.The simple rate of return on the investment is closest to:

Question

Quizplus · Accepted Answer

11ea7761_15be_56eb_81a5_f1f01105e845_TB2580_00 Simple rate of return = Annual incremental net operating income ÷ Initial investment
= $44,000 ÷ ($792,000 - $21,000) = 5.7% (rounded)

(Ignore Income Taxes in This Problem