The Management of Ro Corporation Is Investigating Automating a Process

Multiple Choice

The management of Ro Corporation is investigating automating a process. Old equipment, with a current salvage value of $11,000, would be replaced by a new machine. The new machine would be purchased for $243,000 and would have a 9 year useful life and no salvage value. By automating the process, the company would save $69,000 per year in cash operating costs. The simple rate of return on the investment is closest to (Ignore income taxes.) :

A) 18.1%
B) 11.1%
C) 28.4%
D) 17.3%