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Calculate the annual rate of return expected

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Question - A company is considering purchasing factory equipment that costs $304,000 and is estimated to have no salvage value at the end of its 5-year useful life. If the equipment is purchased, annual revenues are expected to be $120,000 and annual operating expenses exclusive of depreciation expense are expected to be $32,000. The straight-line method of depreciation would be used.

If the equipment is purchased, the annual rate of return expected on this equipment is

a. 17.89%.

b. 8.95%.

c. 28.95%.

d. 57.89%.

Reference no: EM132084884

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