Wallingford MicroBrew
The management of Wallingford MicroBrew is considering the purchase of an automated bottling machine for $96,800. The machine would replace an old piece of equipment that costs $34,000 per year to operate.
The new machine would cost $18,000 per year to operate. The old machine currently in use could be sold now for a scrap value of $10,000. The new machine would have a useful life of 11 years with no salvage value.
Required:
Compute the simple rate of return on the new automated bottling machine. Use straight-line depreciation method. (Round your percentage answer to one decimal place.