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Linwood is making an equipment change at his company. An old piece of equipment, with a salvage value of $60,000, is being replaced by new
Linwood is making an equipment change at his company. An old piece of equipment, with a salvage value of $60,000, is being replaced by new equipment. The new equipment costs $980,000 and would have a 10 year useful life and no salvage value. By replacing the equipment, Linwood will save $164,000 per year in cash operating costs. The simple rate of return on this investment is
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7.2%
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6.7%
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16.7%
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17.8%
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