(Ignore income taxes in this problem.) The management of Kleppe Corporation is investigating automating a process by replacing old equipment by a new machine. The old equipment would be sold for scrap now for $19,000. The new machine would cost $180,000, would have a 9 year useful life, and would have no salvage value. By automating the process, the company would save $30,000 per year in cash operating costs.
Required:
Determine the simple rate of return on the investment to the nearest tenth of a percent. Show your work!

Question

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The Answer of (Ignore income taxes in this problem.) The management of Kleppe Corporation is investigating automating a process by replacing old equipment by a new machine. The old equipment would be sold for scrap now for $19,000. The new machine would cost $180,000, would have a 9 year useful life, and would have no salvage value. By automating the process, the company would save $30,000 per year in cash operating costs.
Required:
Determine the simple rate of return on the investment to the nearest tenth of a percent. Show your work!

(Ignore Income Taxes in This Problem