Question
3. Bahrain Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $180,000 and would
3. Bahrain Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $180,000 and would have a ten-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $12,000 per year to operate and maintain, but would save $48,000 per year in labor and other costs. The old machine can be sold now for scrap for $10,000. What is the simple rate of return on the new machine (round off your answer to the nearest one-hundredth of a percent)?
Click here to viewExhibit 14B-1andExhibit 14B-2,to determine the appropriate discount factor(s) using the tables provided.
10.00%
26.67%
10.59%
11.25%
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