Question

Hill Enterprises wants to replace two old assembly machines with one new, more efficient assembly machine. The old machines are valued at $57,000 each. The new machine will cost $100,000. If Hill’s controllable margin is $158,000 and their operating assets were valued at $600,000 before they bought the new machine, what will their new ROI be?

Answer 1

Answer:

Return on investment after the purchase of the new machine: 24.57%

Explanation:

Old machines: 57,000

New machine: 100,000

controllable margin (operating income): 100,000

operating assets:         600,000

less old machines         (57,000)

add new machines      100,000  

assets after purchase: 643,000

ROI: operating income/ assets

                  158,000    / 643,000 = 0,2457231726283 = 24.57%