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The management of Ro Corporation is investigating automating a process

Management

The management of Ro Corporation is investigating automating a process. Old equipment, with a current salvage value of $12,000, would be replaced by a new machine. The new machine would be purchased for $360,000 and would have a 6 year useful life and no salvage value. By automating the process, the company would save $125,000 per year in cash operating costs. The simple rate of return on the investment is closest to (Ignore income taxes.): 

 

Multiple Choice

  • 18.7%
  • 18.1%
  • 34.7%
  • 16.7%

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