Question - A company is considering purchasing factory equipment that costs $640,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the equipment is purchased, annual revenues are expected to be $180,000 and annual operating expenses exclusive of depreciation expense are expected to be $76,000. 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) 32.5%.
B) 3.8%.
C) 7.5%.
D) 16.3%.