Exercise 13-6 Simple Rate of Return Method [LO13-6) The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $120000. The machine would replace an old piece of equipment that costs $30,000 pet year to operate. The new machine would co st $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 botting machine? 3. What is the amount of the initial Investment assoclated with this project that should be used for calculatihg 4. What is the simple rate of return on the new bottling machine? (Round your answer to 1 decimal place Le. 0.x 23 should be considered as 12.3%) 1 Depreciation expense 2 Incremental net operating income 3 initial investment t Simple rate of return Exercise 13-5 Preterence Ranking [LO13-5 Information on four investment proposals is given below Investment Proposal s(90,000) $(180,00e) $ (78,800) 3(1208,e00) $ 36,000 $ 38,009 $35,000 $ 48,800 Investment required Present value of cash inflows Net present value Life of the project years 7 years6years 6 years Required 1. Compute the project profitability index for each Investment proposal (Round your answers to 2 decimal places) 2. Rank the proposals in terms of preference 3 Answer is complete but not entirely correct. Projec vestment Profitability Preference Rank Proposal Index 140 Second 1.38 3 Thrd C 1 1500 First 133 Fourth