A company is considering buying a machine that costs $500,000, has a useful life of ten years, and is depreciated over its useful life by the straight-line method. The salvage value of the machine at the end of ten years will be $40,000. This machine will replace an old machine that is fully depreciated; the old machine has a salvage value of $75,000 now. If the simple rate of return of this investment is 12.7%, then the anticipated annual incremental net operating income from this machine for each of the next ten years is (Ignore income taxes.):
A. $63,825
B. $46,380
C. $53,975
D. $100,000
Answer: C
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