Calculating the rate of return for an investment

Reference no: EM13313008

The formula for calculating the rate of return for an investment, like a new machine, is as follows: r =(( Increased revenue from new machine-costs of running new machine)-cost of new machine) / (cost of new machine) Some of the specific things that affect the rate of return are outlined below: Increased Revenue from new machine Price for output Increased quantity produced Costs of new machine: Purchase price Acquisition costs (like sales tax and shipping) Costs of running new machine: Taxes Energy Labor Maintenance Other operating costs Suppose that you have a printing machine that you want to purchase for your business and you expect the machine to last one year and have the following prices and costs: • Cost of new machine ($125,000 for the machine, $1000 in sales tax which is added to the cost of the machine and delivery costs of $750) • Costs of running the new machine ($2850 for electricity and $8000 for paper and ink,$ 4000 for labor, and $2500 for maintenance and operating costs) • Increased revenue (3.5 million printed copies which you can sell for $ 0.05 each) Calculate the rate of return for this printing machine for these costs. Show your work.

Reference no: EM13313008

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