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Lavinia Ndahafa
on Dec 16, 2024

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The Jason Company is considering the purchase of a machine that will increase revenues by $32,000 each year. Cash outflows for operating this machine will be $6,000 each year. The cost of the machine is $65,000. It is expected to have a useful life of five years with no salvage value. For this machine, the simple rate of return is:

A) 9.2%.
B) 49.2%.
C) 20%.
D) 40%.

Simple Rate of Return

A financial metric that calculates the gain or loss of an investment over a specific period as a percentage of the investment's initial cost.

Cash Outflows

Payments or expenditures made by a business or individual, resulting in a decrease in cash balance.

Useful Life

The estimated duration of time that an asset is expected to be useful in operations, contributing to the company's income generation.

  • Explore the fundamental components of capital budgeting and the assortment of techniques utilized for the appraisal of investment projects.
  • Gain knowledge about the simple rate of return method and its application.
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Ethan SchulzDec 19, 2024
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