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%.