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The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $120,000. The machine would replace an old piece of equipment that costs $30,000 per year to operate. The new machine would cost $12,000 per year to operate. The old machine currently in use is fully depreciated and could be sold now for a salvage value of $40,000. The new machine would have a useful life of 10 years with no salvage value.Required:1. What is the annual depreciation expense associated with the new bottling machine?2. What is the annual incremental net operating income provided by the new bottling machine?3. What is the amount of the initial investment associated with this project that should be used for calculating the simple rate of return?4. What is the simple rate of return on the new bottling machine? (Round your answer to 1 decimal place.)

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$12,000 is the annual depreciation expense associated with the new bottling machine. 7.5% is the simple rate of return on the new bottling machine.

Cost savings = Equipment cost - New machine cost = 30,000 - 12,000 = 18,000. Depreciation per year = Cost of automated bottling machine ÷ Useful years = 120,000 ÷ 10 = 12,000. Simple rate of return = (Cost savings - Depreciation of new equipment) ÷ (cost - salvage of old)  = (18,000 - 12,000) ÷ (120,000 - 40,000) = 6,000 ÷ 80,000 = 0.075 = 7.5%.

Depreciation is a non-cash business expense that is estimated over the time that a valuable asset is utilized by your company. The simple rate of return is calculated by dividing the additional net income anticipated from a potential investment opportunity by the initial investment.

To learn more about Depreciation visit: https://brainly.com/question/29355461

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