The management of Wallingford MicroBrew is considering the purchase of an automated bottling machine for $66,400. The machine would replace an old piece of equipment that costs $41,000 per year to operate. The new machine would cost $20,000 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 8 years with no salvage value.
Required:
Compute the simple rate of return on the new automated bottling machine. Use straight-line depreciation method.